To ask the Chancellor of the Exchequer, what assessment he has made of the potential merits of extending mortgage repayment holidays during the covid-19 outbreak.
To ask the Chancellor of the Exchequer, what steps he is taking to protect mortgage borrowers' credit history following the end of mortgage payment holidays.
The Government is working closely with the Financial Conduct Authority (FCA) on next steps for mortgage payment holidays. Currently borrowers that are in financial difficulty as a result of COVID-19 can take out a new 3-month mortgage holiday until 31 October 2020. Those that have already taken a 3-month payment holiday, can also extend this for a further 3 months until 31 October 2020 under the FCA’s current guidance.
The FCA recently published their consultation document on next steps for mortgage holidays, which can be found here: https://www.fca.org.uk/publication/guidance-consultation/mortgages-and-coronavirus-additional-guidance-for-firms.pdf. Based on responses from this consultation the FCA, alongside Government, plan to set out next steps in due course.
We recognise that a mortgage holiday is not the right solution for everyone, and where consumers have taken a mortgage holiday and can afford to re-start payments, it is in their best interest to do so. There are also a number of other forbearance options available to borrowers through their lender if they are struggling to keep up with their mortgage payments. Borrowers who are worried about their financial situation should get in touch with their lender as soon as possible.
The FCA requires that there should be no worsening of arrears status on a consumer’s credit file as a result of taking out a payment holiday. This was reconfirmed in the FCA’s updated guidance published in June and continues to be the case for any borrower taking a payment holiday until 31 October 2020.
However, it is important to remember that when borrowers apply for new credit, lenders will continue to carry out affordability assessments which uses a range of information beyond a credit file. This will include an analysis of income and expenditure, to assess future ability to make repayments, which may have been affected by COVID-19.