The industry has been reacting to the news of a three-month mortgage holiday granted by Chancellor of the Exchequer Rishi Sunak on Tuesday 17 March following the Coronavirus crisis.
The mortgage holiday will be for those missing out on wages due to being affected by the virus.
This was one of several measures made by the Chancellor during a media briefing at Downing Street yesterday afternoon.
Rob Griffiths, director at the Mortgage Market Alliance, said: “Mortgage borrowers who wish to accept a mortgage holiday from their lender need to be fully aware of the detail of such an arrangement and what it actually means for their mortgage payments, the length of their term, and how this might appear on their credit file.
“This is not the lender paying the borrower’s mortgage for them for a three-month period but a deferment of these mortgage payments into the future.
“With that being the case, borrowers should get the detail of any such arrangement and use their mortgage adviser to provide an explanation of what this actually means for them, and to understand what (if any) other options might be available.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added that this mortgage holiday will be welcomed by those who have had financial concerns since the crisis began.
He added: “There is so much uncertainty that knowing the mortgage, which is most people’s biggest outgoing, will be paid, will remove a significant burden.
“The same is true for those struggling to pay their rent. Speak to your landlord as soon as you can – he or she may be able to apply to their buy-to-let provider for their own payment holiday if otherwise they would struggle to pay their mortgage should you fail to pay the rent.
“Lenders tend to be reasonably sympathetic to any illness that affects a borrower’s ability to pay their mortgage, whether it’s coronavirus or something else.
“They may ask for evidence that you are unwell but the message to borrowers, particularly the self-employed who are most likely to be affected in terms of their income, is that anytime you are struggling to pay your mortgage, get in touch with your lender.
“Don’t bury your head in the sand and hope the problem will go away – it won’t.
“Some lenders have existing payment holidays of longer than three months so it is worth asking.
“But remember that as it stands interest will still be calculated over the period of the payment holiday and then added to the loan along with the repayment part of the payment.
“The monthly direct debit may then be increased to cover the amount added once you resume your payments.
“The important thing is to ask for help as early as possible rather than ignoring the issue.
“While lenders should offer support to borrowers, they can only do that if they know there is a problem.
“It is good practice to keep a note of any conversations or correspondence you have with the lender about a payment holiday, as if is not marked down correctly and is noted as arrears, there could be an issue when you come to remortgage in two or three years’ time.
“But if it is marked correctly, it shouldn’t harm your credit rating.”
“Those coming up to remortgage should consider an offset deal, which is a little like a cheap overdraft facility that you can dip in and out as you need it.
“If you have a £200,000 mortgage and the same amount in savings offset against it, for example, you pay no interest and the real benefit is that you know you have a cash buffer if you can’t work for several months – or longer.”
Richard Hayes, chief executive and co-founder of online broker Mojo Mortgages, discusses the impact the crisis has had on their online business and how this mortgage holiday fits in with the recent events such as the cut in interest rates.
Hayes said: “The market has quickly evolved in the past few days, however, as an online broker we’ve actually seen an increase in the number of queries we’ve received from those who are still looking to move to a new house in the next few months, as well as from those who need to remortgage.
“Many of our new customers don’t want to wait and see what happens if it means that they could potentially miss out on their dream home.
“As an online broker, our whole team is available and working from home, so we are very well equipped to keep applications on track and expect more customers to reach out to us in order to help them in the next few months.
“For those who have a mortgage, the Chancellor announced that lenders will be permitting payment holidays.
“These allow you to take a break from paying part or all of your monthly payment.
“But they do increase the total amount you owe so it’s not free money. If you are having trouble meeting all or part of the mortgage payment, contact your bank immediately.
“What’s more, as the Bank of England cut the interest rate last week to 0.25% from 0.75%, it means that those who are on a variable or tracker rate mortgage will see a reduction in their mortgage payments of roughly £25 a month per £100,000 of outstanding mortgage balance.
“Despite this, we’ve seen that trackers aren’t proving to be too popular with customers who prefer the stability of fixed rates, and these fixed rates are already at some of the lowest ever.”
Miles Robinson, head of mortgages at Trussle, added: “Amid warnings that coronavirus cases are set to increase, the Chancellor’s announcement demonstrates a proactive approach to help ease its impact on the housing market.
“Freezing mortgage repayments for those affected by the outbreak will help to reassure many homeowners who are worried about their ability to make their monthly payments.
“We’d advise anyone concerned about what this might mean for their mortgage to get in touch with their broker or lender to discuss the options available to you.”
A further pledge of £330bn was promised to be made available to UK businesses.
Mark Stephens, chief executive at Allica Bank, said: “This announcement from the Chancellor could not come soon enough for small and medium sized businesses up and down the country.
“From rates holidays and mortgage relief to grants and state-backed loans, Mr Sunak has unleashed a broad range of supportive measures.
“Business owners will be watching closely in the coming days as the finer details of these measures are revealed.
“As ever, time is of the essence – for many businesses in the worst-hit sectors it’s going to be about whether they can access the funding quickly enough to ensure their survival.
“The financial services sector also needs to step up to make sure we are there for businesses in their time of need.”