The consequences of the current Coronavirus Pandemic is causing much uncertainty for all of us and many people fear that they will suffer severe financial difficulties in the forthcoming months.
On Tuesday 17 March 2020, the Chancellor Rishi Sunak announced that, as part of a government package designed to ease the financial burden on homeowners at this unprecedented time, those whose properties are subject to a mortgage may be offered a three-month “mortgage holiday”. This means that homeowners may be able to temporarily stop paying their monthly mortgage instalments without facing repossession of their home.
Mortgage lenders are presently setting out their proposals for “mortgage holidays” which will entitle some borrowers to defer their mortgage payments for a limited period of three-months.
The scheme does not release borrowers from the obligation to fulfil their commitment to repay the full capital loan and interest thereon – interest on the outstanding capital sum will continue to accrue, but the monthly mortgage instalments during the “mortgage holiday” will be £zero. Borrower will be expected to repay the unpaid instalments when they get back on their feet financially, or otherwise by way of extending the loan term by three months.
A “mortgage holiday” may not be the best solution for all borrowers and it may not be in the best interest of all borrowers to take advantage of this option.
A “mortgage holiday” is usually agreed subject to the lender undertaking an assessment of a borrower’s finances. However, given the sudden impact of the Coronavirus Lenders are enabling borrowers to fast-track the system by self-certifying that they qualify for a “mortgage holiday”.
In general terms, self-certification is available to borrowers who are:-
• Up to date with their mortgage payments; and
• Are impacted by Covid-19
However, the criteria is likely to vary from lender to lender.
In order to minimise the long-term financial impact on borrowers, the “payment holiday” is limited to three months – it is only intended to be a temporary measure to ensure that repayment of the mortgage will remain affordable and sustainable so that borrowers do not suffer further financial difficulties in the future.
If homeowners qualify for the payment holiday and wish to take advantage of the scheme, they are reassured that their credit rating will not be affected.
If you are concerned about meeting your mortgage repayments contact your mortgage lender at the soonest opportunity to discuss your options.
Please remember if you do not keep up with your mortgage payments, your lender will become entitled to repossess your property.
Wolferstans can offer assistance and advice in relation to property, employment and debt recovery.
We do not offer a mortgage advice service. If you are worried about debt please contact the Citizens Advice Bureau.