Mortgage payment holidays coming to an end – what now?
The UK government furlough and mortgage payment holiday schemes will both end on 31st October.
Furlough will be replaced by a new Job Support Scheme for those still in work – taking effect from 1st November for six months. This means that UK employers must decide what happens to their furloughed staff of which, 11% of the entire British workforce is on partial or full furlough across all sectors, according to the Office for National Statistics (ONS).
Although the government has announced new measures to support people after furlough, undoubtedly, some who have been on the scheme or perhaps had a mortgage payment holiday will see their income reduced possibly for a further six months. This brings about many other challenges including how to keep up the mortgage payments and household bills.
If you’re worried about paying your mortgage and not sure what to do after both the government furlough and mortgage payment holiday schemes officially end, there is still help available.
What happens when my mortgage payment holiday ends?
It’s important to talk to your lender at the earliest possible stage. You should be speaking to them now about your mortgage payment holiday coming to an end in October and discussing what happens next, including how you plan to make up the shortfall in future.
Most lenders will have already agreed this upfront with you when you took out the mortgage payment holiday, but if you’re unsure, contact them immediately to discuss your options.
Unless your lender has heard from you, you will be expected to meet your normal monthly mortgage payment in November, so we can’t stress enough the importance of engaging with your lender.
What if I can now afford to make mortgage payments?
If you can afford to start paying your mortgage again, you should. It is a critical outgoing which you don’t want to fall into arrears with as this can lead to further challenges in obtaining credit in the future.
It should be your priority to pay the mortgage, if you can.
What if my financial situation hasn’t improved?
Most lenders are understanding about the current unprecedented times we’re facing. If you’re still experiencing payment difficulties due to the coronavirus pandemic, lenders can offer further support so do not be afraid to have a conversation with them.
However, if you’re contacting a lender to discuss a possible extension of your payment holiday, you will be subject to a detailed income and expenditure check.
This means you must have a clear overview of all your outgoings and income – be prepared to share your previous 3 – 6 months’ worth of bank statements too. Try our budget calculator here to line up all your finances before speaking to your lender.
What help is available after the mortgage payment holiday scheme ends?
If your employment status is still uncertain beyond 31st October, be sure to get evidence of this before speaking to your lender about what other help might be available. If you’ve had your hours reduced due to the pandemic or income significantly cut, which means you’re still struggling to keep up the mortgage payments, be prepared to share proof of this with your lender.
Increasing your mortgage term
Your lender might be able to extend the length of your mortgage term to help make your payments more manageable in the future, but be aware that this option means you’ll pay more in interest.
Once agreed with your lender, another method would be to switch from a capital and interest repayment (your full normal monthly payment) to an interest only payment for a short or defined period whilst you overcome your current financial challenges. This will reduce your monthly repayments and make them more manageable as you’ll only cover the interest and not pay the normal monthly payment.
You will still need to pay back any deficits in your normal monthly payment and be aware that this option could affect your credit score.
What if I’m already in payment arrears?
Lenders are always willing to offer support so if you’ve fallen into arrears, speak to them as soon as possible to address the situation.
It might seem daunting, but they’re open to helping customers.
Equally, at Mortgage Advice Bureau, we have over 1,400 advisers nationwide who you can speak to if you’re worried about your current financial situation and need support with budget planning.
Contact our team here.
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.