Banks and mortgage lenders should continue to help homeowners who have been affected by Coronavirus, even after the payment holiday window closes next month, the UK's financial watchdog has said.
The Financial Conduct Authority told lenders to show 'forbearance' by taking customers' living costs and income into account when special measures come to an end on 31st October.
Firms will also be obliged to tell customers about the credit implications of any changes to repayment terms and to direct those struggling towards help for debt and financial management.
Since March, homeowners have been able to apply for up to two' mortgage holidays', allowing them to delay repayments for up to three months if their income had been affected by the pandemic.
Some 1.8 million homeowners - nearly 1 in 6 mortgages - signed up to the government-backed scheme, but the window for applications is soon due to close.
As of 14th August, 731,000 borrowers were still signed up to the payment holiday.
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 payments should do so for their own long-term interests and so that help can be targeted at those most in need.Said: Christopher Woolard, Interim Chief Executive at the FCA
The watchdog told lenders they should prepare official policies outlining the options available to customers in a variety of circumstances, especially for cases where customers only had a short term left on their mortgages, had become unemployed, or lost a significant portion of their income.
Lenders' priorities, it said, should be to offer customers options in a way that showed patience and restraint on the part of the lenders.
For people who continued to struggle financially, firms will also be required to go beyond offering tailored repayment terms; under the new guidance, lenders will be expected to signpost customers towards support services and guidance on how to manage their situation.
In addition to this, they will need to inform borrowers about the potential impact of any changes to their payment schedule on their credit ratings, which could affect customers' ability to borrow in the future.
Lenders understand that many households will continue to see their finances squeezed as the pandemic continues and will be offering a range of support for those who need it. It is essential that customers go online or contact their lender to consider the best solution for them. Firms will be communicating with customers whose mortgage payment deferral is coming to an end to discuss the options available. Those who can afford to resume payments should do so, as it will always be in their best interests in the long run.said Eric Leenders, Managing Director of Personal Finance at industry body UK Finance
UK Finance reported that the number of payment deferrals peaked at the start of June, but added that more than 70% of borrowers who signed up have since gone back to making full payments.
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