Cost of taking a mortgage holiday revealed

Ryan Fowler

May 28, 2020

fca payment deferrals

The average cost of a three-month mortgage holiday is £665.08, according to research from money.co.uk and its mortgage technology partner Koodoo.

Millions of homeowners have taken advantage of the government’s mortgage holiday scheme, with the latest data revealing one in six mortgages are now covered by a payment holiday.

On average, homeowners looking for help with their mortgage payments have an outstanding loan of £136,000. Taking a three-month mortgage holiday would see their regular monthly payments jump by £11.21 to £720.22 and based on an average 21-year term, this would cost an additional £665.08

With the scheme now extended to six-months money.co.uk calculated that taking the additional three month mortgage holiday, could add an additional £1,331.95 (£22.70 per month) to the full amount owed.

Salman Haqqi, personal finance expert at money.co.uk, said “Mortgage holidays have proved to be a lifeline for millions of homeowners, who would have otherwise struggled to meet their payments and may have faced losing their homes.

“However, our findings show that payment holidays should be a short term fix. It’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid.

“And in most cases when a customer takes a three month payment holiday in a 21 year or 252 month mortgage, the end date of the mortgage doesn’t get automatically extended, so the customer now needs to pay back the mortgage in 249 months.

“As the nation gradually starts to open for business and furloughed workers are brought back, restarting mortgage payments should be a priority. And, if you are still able to make your payments in full, you should continue to do so”

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