Payment Holidays – Plan for their end
Thanks to Mortgage Solutions for this article:
Government and the financial services industry should be preparing for the end of the three-month mortgage payment holiday already, MPs have been told.
The heads of UK Finance and the Finance and Leasing Association (FLA) warned that lenders’ resources were finite and it could not be automatically expected that payment holidays would simply rollover for another three months in June if the current situation remains unchanged.
Giving evidence to the Treasury Select Committee of MPs, FLA director general Stephen Haddrill said: “We need to work out what happens after three months, before June.
“I think the scenarios need to be developed now, not least because resources are finite.
“We don’t want to get to the end of the three-month period just to go on an assumption that there will be another three months, there needs to be some serious modelling done before we get to that.”
He added: “We will need to put our thinking caps on about what happens at the end of the three months and we will do that as soon as possible.”
Reliefs must be paid back
The mortgage payment holidays for owner occupiers and residential landlords were announced by chancellor Rishi Sunak at the end of March and can apply for up to three months for borrowers negatively impacted by the coronavirus.
Yesterday, UK Finance and the Building Societies Association revealed that more than one in nine residential and buy-to-let borrowers had applied for a mortgage payment holiday.
Haddrill added that as of 3 April, FLA members had received 500,000 payment holiday applications with 300,000 approved.
But the trade bodies took the chance to emphasise to MPs that these could not go on for long, interest was accruing, and would need to be paid back.
UK Finance CEO Stephen Jones added: “Financial institutions have only got finite resources in terms of the amount of holidays they can continue to roll.
“It’s very important that households and businesses understand that these reliefs which are given must be temporary and there will come a point where they will need to be restored.”