Millions of people could be in line for a 'mortgage holiday' after the Chancellor announced a package of emergency measures to help the most vulnerable people cover their bills during the coronavirus pandemic.
Rishi Sunak said those who are in financial difficulty – whether they have the virus or not – will be able to defer their payments for up to three months to help them budget financially.
This will include the self-employed and those on statutory sick pay – which could leave families surviving on just £94.25 a week or less if they're on benefits.
The initiative does not mean someone else will cover your payments for you – instead, your mortgage term will be extended to cover the additional period.
The proposal was unveiled by Boris Johnson and Chancellor Rishi Sunak on Tuesday, as part of Britain's fight against the pandemic.
"We have had extensive discussions with the banks, who understand the situation that people are in and will, they have assured me, provide flexibility to those people in those circumstances, and understanding," Sunak said.
We've got a comprehensive guide on how to apply for a mortgage break, here.
How do 'mortgage holidays' work?
In short, the mortgage repayment is simply deferred for a set period. The monthly payment changes to zero, and interest accrues for the period. This may be particularly appropriate where there is a temporary shortfall of income.
However, this is not a solution where, because of a permanent reduction in income, a borrower is unable to afford anywhere near the full mortgage repayments and there is little prospect of an improvement in the situation in the foreseeable future.
Where repayments are deferred for a time, the borrower will need to make up these repayments in the future, which could be over the remaining term.
Here's how each of the banks have responded to the new rules.
Barclays told Mirror Money that alongside the mortgage extension, it's offering people the option to switch from capital repayment to interest only for up to 12 months. This could see your future payments jump even higher though – so it should be considered a very last option.
The extension will apply to residential mortgage customers who have been financially impacted by COVID-19. It will not negatively impact your credit file.
Anyone affected should get in contact with Barclays at the earliest opportunity to discuss their case.
A Barclays spokesperson said: "As a responsible lender, it is crucial that we offer the right support to our customers at this time.
"We have therefore decided to offer customers who are potentially facing financial difficulty, a number of options to support them through this time. These include repayment holidays for up to 90 days and switching from Capital Repayment to Interest Only for up to 12 months.
"We encourage customers to get in contact with us at the earliest opportunity to discuss the most suitable solution."
High street lender Santander has confirmed that anyone who applies for a break will not see their credit file impacted.
"Santander is fully supportive of the industry wide 3-month payment suspension to support mortgage customers that have been impacted by Covid-19," a spokeswoman told Mirror Money.
"Customers who know that they will be unable to make a mortgage payment within the next 30 days should contact us now to discuss their options based on their individual circumstances."
NatWest and RBS
NatWest and RBS already pledged to make the move last week – stating that any customers in financial trouble thanks to the infection – whether they have it or have seen their earnings hit because of it – could qualify for a break from mortgage and loan payments, higher card limits and be able to close savings accounts early with no penalties.
There are no blanket rules for the scheme – instead it will be considered on a case-by-case basis.
The bank is also offering:
- Customers the chance to close their fixed savings accounts with no early closure charge
- Refunds on credit card cash advance fees
- The option to apply for an increased credit card limit
- The option to request an increased cash withdrawal limit of up to £500 on your debit card.
An RBS spokesperson said: "We are monitoring the potential impact of Coronavirus across all our customers to ensure we can support them appropriately through any period of disruption. We have a strong track record in working with our customers who are affected by disruption outside of their control."
"We understand that there may be circumstances where a personal customer may fall into financial difficulty as a result of the impacts of Coronavirus, for instance, loss of income. We will look to understand each customer’s situation on a case-by-case basis and can offer a number of options to help them manage their finances. We would encourage any customer experiencing financial difficulty to get in touch with us."
"Being there for our customers when they need us is our priority," a Lloyds spokesman told Mirror Money.
"We are making some temporary changes over the coming weeks, and will be providing individual support to customers who need extra help."
This will include n o fees for missed payments on credit cards, loans and mortgages and payment holidays on mortgages and loans with additional support provided where customers need it.
An agreed payment holiday will not impact your credit file because a payment will not be expected that month.
Source: Read Full Article