The Financial Conduct Authority, in conjunction with the government, have recently announced that the Covid-related mortgage support scheme (otherwise known as the payment holiday scheme) is to be extended from November 1st for another 6 months.
The first incarnation of this undoubtedly helped a lot of people who saw an income dip during the early stages of lockdown and it was very welcome. The statement at the time was that taking a payment holiday would not affect your credit score.
While this has largely been true, it has influenced lenders’ decision making when some people have come to apply for a new mortgage. Lenders have enquired about the circumstances around the need for a payment holiday and, understandably, want some form of reassurance that you might not need to take another one.
Where you have been on furlough leave, the lender wants to make sure you have returned to work (or at least have a firm return to work date from your employer).
The new support scheme (I much prefer that to a “holiday” but that debate is for another day!) will be slightly different. It will allow people to suspend payments or lengthen the term to reduce payments or maybe even switch to interest-only payments for the time being.
A very important change is that lenders will be allowed to mark up your credit file with any changes they make. They will be able to record suspensions as missed payments potentially and reduced or interest only payments as an “arrangement” and these can certainly affect your ability to borrow any money going forward.
Consumer advice always say to communicate with your lender if you are facing difficulties in making payments and that is a good tip.
What is also a good tip is to speak to an independent mortgage adviser who will be able to assess all options for you with more lenders than just your current one.
Brunel Mortgages & Loans Ltd