OneSavings Bank: Better that payment holidays are extended than people go into arrears
In the most recent of Mortgage Introducer’s series of webinars discussing the impact of COVID-19 and the future of the intermediary mortgage market, Alan Cleary, group managing director, mortgages, at OneSavings Bank shared his views on unconfirmed reports of a potential extension to the mortgage payment holiday scheme.
Mortgage payment holidays were introduced in March, and originally expected to last for three months.
Although as yet unconfirmed, The Times has reported that the Financial Conduct Authority (FCA) is considering extending this for as much as 12 months.
In response to a question about this possibility, Cleary said: “We need to support customers, and if the original three months isn’t long enough to get people out of furlough back into work then we’re going to be as supportive as we can.
“Clearly we’re motivated, as a society and as a lender, to try and avoid people going into arrears, because that’s bad news.
“If we have to hang on to another three months and extend the payment holiday to allow more people to get their finances sorted, then I’m sure the lending industry is going to be quite supportive of that.”
In response to the same question, Ian Andrew, managing director, intermediary sales, at Nationwide Building Society added that it is also important to map out supports for when payment holidays do end.
He said: “We already have a package of support we’ve been working on for customers coming off payment holidays.
“There will be a variety of options required at that point, but we can’t publish anything until we see what the regulator comes out with.
“There will have to be a high degree of support and forbearance for customers.
“Whether that’s something that comes out centrally or whether we do that on an individual basis will be clearer by the end of this week.”
A follow-up question asked, were the FCA to mandate an extension, what problems this might cause for specialist lenders’ funding arrangements.
Cleary said: “As a bank, it doesn’t cause a huge issue because if people don’t make their payments and we agree a payment holiday, that’s a liquidity issue, we just will need to raise more liquidity to cover that position and to be fair there’s a lot of liquidity out in the market place.
“From my personal point of view, I’d rather see payment holidays extended than see people go into arrears.
“If people go into arrears we need to start provisioning against those arrears going bad, and therefore that consumes capital, and actually slows down our lending appetite because the capital is being consumed.
“So in essence, it’s much more preferable to see payment holidays than arrears.”
He added: “If you’re a non-bank lender that’s a problem, because you don’t have access to retail deposits to fund out that liquidity position.
“But my understanding is that UK Finance and the regulators are looking at ways to support the non-bank lenders as well, so that they can play their part in this. I’m supportive of that as well.”