The UK's financial watchdog has ordered banks to offer 'tailored' mortgage repayment options for people who will continue to be affected by Coronavirus after payment holidays end on 31st October.
In new guidelines issued on Wednesday, The Financial Conduct Authority told lenders they should be considering 'long term and short term' solutions for struggling customers, including restructuring mortgages or extending repayment terms where appropriate.
In March, the Chancellor of the Exchequer Rishi Sunak announced a three-month payment holiday for mortgage holders, to help people affected by the economic impact of COVID-19' get back on their feet'.
The holiday was extended for a further three months in June by the Treasury, and now expires, at the end of October- the same time as the hold on home repossessions for non-payment.
According to UK Finance, 1.9 million borrowers – equivalent to 1 in 6 mortgages - signed up to the scheme at some point, although more than 70% have since resumed normal payment terms.
It is important that consumers who can afford to resume mortgage payments should do so. However, we understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income. We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track.Said The interim chief executive of the FCA Christopher Woolard
Despite the extraordinary measures taken by banks since the start of the outbreak in February, the consensus in the industry is that many people will continue to have difficulties with repayments after the temporary holiday expires.
It is important for customers who are able to resume their mortgage payments to do so, however lenders are fully prepared to support any customers who face difficulty, and it is vital that those who are facing payment difficulties get in touch with their provider as soon as possiblesaid managing director of personal finance at UK Finance, Eric Leenders
In its statement, the FCA warned banks not to take a 'one size fits all' approach in dealing with such customers, urging them to prioritise people facing the greatest financial difficulty.
Aside from restructuring payments, the regulator said that banks ought to provide customers with advice and support in managing their finances if they were struggling.
The watchdog also included a warning to customers that if they took measures such a payment deferral, or agreed to change the terms of their mortgage, it would be reflected on their credit file.
When the scheme was first introduced, neither the FCA nor Treasury informed customers of this, potentially causing many people to apply for assistance without full knowledge of how it might affect their finances in the future.
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