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Quilter: FCA guidance will see some struggle to borrow in the future

Jessica Bird

September 14, 2020

Gemma Harle Quilter

The Financial Conduct Authority (FCA) has confirmed that from 31 August, support measures such as mortgage payment holidays will affect borrowers’ credit files, which will likely cause those struggling now to face difficulties borrowing in the future, according to Quilter.

Gemma Harle (pictured), managing director of Quilter Financial Planning, said the FCA guidance came at a time when concerns around the financial impact of COVID-19 have started to resurface.

She said: “Despite it not being the summer many of us expected, life seemed to be resuming to an extent; COVID cases were waning, restaurants were buzzing, and the housing market was booming thanks to the stamp duty holiday.

“However, in just the last week or so the ever-looming presence of coronavirus has reared its head again and the prospect of more stringent rules and the financial harm that they can cause is back on the agenda.

“The FCA’s mortgage guidance, released this morning, comes at a time where people once again start to look into the future and worry about fulfilling their mortgage payments if their job is at risk or if already made redundant.”

However, while extended support measures will help in the immediate future, Harle pointed out that this might cause problems for borrowers down the line.

She said: “Unfortunately, the FCA has confirmed that those who are still struggling to make payments after their second mortgage payment holiday or after their first deferral if ends after the 31 of October will have any missed payments loaded onto their credit file which could make it harder for them to borrow in the future.

“Mortgages are often the biggest single piece of debt anyone takes on in their life and it is important to make sure that any decision works both for the short and long term if possible.

“Extending the term of a loan means it will cost more over the lifetime of the product so it is a decision that requires careful thought.

“For most people it will only be the right move if they face imminent financial difficulty and it is always worth if possible discussing your options with a professional.”

Nevertheless, the guidance was still a positive step, she added: “This guidance does however show that the FCA is still very much encouraging lenders to support their customers who may be struggling to meet their payments.

“Some of the mechanisms being encouraged in relation to forbearance include applying simple interest rather than compound to any payment shortfall or reducing the interest rate charged on these sums in some cases to 0%.

“This will help customers avoid spiralling into an unsurmountable mountain of debt.

“What is clear from this guidance is that minimising the financial worry that can result in failing to meet payments as a result of the unique circumstances that we find ourselves in are front and centre of the FCA’s proposals.

“This is a difficult time for everyone and the industry as a whole must do all we can to help reduce the mental health issues that can result from financial worries at such a worrying time in general.”


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