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Mortgage payments have been a challenge for many families in recent months, as households have been forced to reckon with the impacts of the pandemic. To help those struggling financially, the government and the Financial Conduct Authority (FCA) introduced payment holidays. These payment holidays or freezes involved Britons being able to hit pause on making repayments of their loan if facing financial difficulties.
Payment holidays have provided an important lifeline for millions of people right across the country.
They have offered a short period of time for homeowners to get back on their feet and eventually start the repayment process once more.
However, as this form of support comes to an end, the FCA has published additional guidance to confirm the support borrowers will receive if they continue to run into financial difficulties.
There was even concern that further help offered after the end of payment holidays could affect credit ratings in the future.
The FCA has said credit reporting can resume as normal, with further arrangements reflected on credit files.
This, the FCA said, will help to ensure lenders have an “accurate picture” of financial circumstances to reduce the risk of unaffordable lending.
For those who are facing continually challenging circumstances, the watchdog has said firms should liaise to find a suitable repayment option.
This may involve analysing the current agreement and making changes agreed between the two parties.
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Short-term arrangements where a customer makes reduced payments or no payments at all could therefore be on the table.
For those approaching the end of a payment holiday, they should expect to be contacted by their lender.
The lender should ask about a household’s financial circumstances and whether they can resume payments or if an alternative arrangement needs to be reached.
The FCA has warned that a ‘one size fits all’ approach should not be taken, and instead lenders should make every effort to ensure the needs of their borrowers are met individually.
But lenders have also been told they must check their customers can afford repayments.
This is so as to avoid spiralling debts and any other potential issues which could arise from regular mortgage payments.
Christopher Woolard, interim chief executive at the FCA, commented on the climate for borrowers.
He said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time.
“Consumers in these situations will benefit from firms providing them with tailored support.
“However, it is very important that consumers who can afford to resume mortgage payment should do so for their own long-term interests and so that help can be targeted at those most in need.”
Homeowners will have until October 31 to apply for a payment break if they are still struggling.
But such an arrangement may be beneficial as the three-month standard period could carry borrowers into early 2021.
Those who are considering such an option, though, are encouraged to take caution.
This is because payment holidays do not stop the interest accrued on a mortgage, and could mean higher repayments in the long-run.
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