The Financial Conduct Authority (FCA) has confirmed that its guidance on mortgage payment holidays will not extend past 31 October, but has called on lenders to provide tailored support to borrowers in need moving forward.
Richard Lane, director of external affairs at StepChange Debt Charity welcomed the announcement as a step towards cushioning the impact of COVID on people’s finances.
He said: “We’re pleased to see the FCA telling firms that they should not rush to possession action for people whose mortgage problems have arisen due to COVID, and that firms should not take a ‘one size fits all’ approach.
“It’s vital that there is ongoing recognition of the fact that, for many people, the financial aftershocks from COVID will take a while to subside, even for those whose finances will be sustainable in the long run.”
However, the charity pointed out that despite the protections in place, payment holidays would likely have long-term ramifications that should be dealt with.
Lane said: “We’re also pleased to see the clarity with which the FCA sets out its expectation that people’s credit records should not be affected by having taken payment holidays if they resume their contractual payments and agree a mechanism for clearing arrears with their lender.
“However, we think there is still the risk of unintended consequences out of [credit reference agency (CRA)] reporting, both on mortgages and more generally.
“We would like to see more reassurance that the mechanisms agreed by lenders will be truly affordable, taking account of people’s wider financial commitments.
“It’s clear that the regulator still anticipates an impact on many people’s credit records.
“It’s important that this doesn’t result in counterproductive behaviour, with people potentially trying to protect their credit status at the expense of truly affordable payment plans – for a great many people, ongoing forbearance and a reduced payment plan will be the only right and sustainable option, despite the credit status impact.”
Eric Leenders, managing director of personal finance at UK Finance, said that the provision of considered, tailored support is something firms are already prepared and willing to do.
He said: “The industry has provided unprecedented support to customers as part of its clear plan to get Britain through the coronavirus crisis.
“As we begin to arrive at a ‘new normal’, a more tailored approach to customer support using a range of measures will likely be more suitable for those customers who continue to experience financial difficulties or find themselves newly affected by the ongoing crisis.
“It is important for customers who are able to resume their mortgage payments do so, however lenders are fully prepared to support any customers who face difficulty and it is vital that those who are facing payment difficulties get in touch with their provider as soon as possible.”
David Thomas, president and chair of the Society of Mortgage Professionals, agreed that this provides an opportunity for the mortgage industry, and particularly the adviser community, to help with people’s financial recovery.
Thomas said: “We support the messages, sentiment and spirt of the FCA’s announcement this morning regarding the additional support for mortgage borrowers at this time.
“The wider advice community has shown great resilience and professionalism during the pandemic with some excellent examples of much needed help and support for their clients at this time.
“Whilst many mortgage advice firms and their advisers have suffered through lockdown, we are encouraged by the apparent resurgence in lending and the prospects for the future.
“The FCA’s proposals present an opportunity for all those in the mortgage advice community to demonstrate true professionalism in helping their clients to consider and negotiate their way through all options available to them at this time.”