Regulator proposes 'tailored support' for mortgage holders once payment holidays end

At the start of the pandemic back in March, the Financial Conduct Authority (FCA) introduced three-month payment holidays for mortgage customers, meaning those struggling could ask for a temporary break from making mortgage payments. These were extended in June.

But guidance on mortgage payment holidays is set to end on 31 October 2020, with the majority of customers who took one expected to start repaying in full again. Yet many may continue to feel the financial impact of the coronavirus pandemic, while others may be newly affected in the coming months.

As a result, the FCA has proposed new guidance so that mortgage customers continue to get support through the pandemic – whether they originally took out a payment holiday or not.

This guidance says firms should consider a range of long-term and short-term measures to help customers. This could include offering arrangements so that customers can continue to pay nothing or a reduced amount towards their mortgage for a specified period, or restructuring mortgages.

However, unlike current payment holidays which aren't recorded on your credit file, the FCA says firms SHOULD report any further forbearance after 31 October 2020 – such as extra payment deferrals once your original payment holiday has ended – to credit agencies.

The FCA is not holding a formal consultation on the proposals, but has asked for comments on its draft guidance by 5pm on Tuesday 1 September.

See Coronavirus Finance & Bills Help for more information on support with mortgages and other debts, rental help and more.

What is the FCA proposing?

The FCA has already said that firms should contact mortgage customers before their payment holidays end, to give them information about restarting payments and any extra support that's available.

And under its latest proposed guidance, it says firms should avoid using a 'one size fits all' approach, and instead use a range of long-term and short-term forms of forbearance, including:

• Extending the term of a customer's mortgage.

• Changing the type of mortgage a customer holds, for example switching the customer to an interest-only mortgage or a product with a different interest rate.

• Deferring payments the customer owes.

The FCA says that firms must be flexible in the support they offer, and acknowledge that customers may be facing uncertainty about their finances that makes it difficult to commit to long-term arrangements – for example, if their work could be affected by local restrictions, or if they have been furloughed and are unsure about the future of their job.

As a result, the FCA says firms may need to delay taking more long-term action such as changing the customer's mortgage type, and instead offer short-term arrangements such as deferring or reducing mortgage payments to give the customer a chance to get back on track.

Firms must make it clear to the customer if their credit files will be affected by taking further support after their payment holiday ends. They should also offer borrowers support managing their finances, which could include money guidance or referrals to debt advice.

What does the FCA say?

FCA interim chief executive Christopher Woolard said: "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. Firms should not take a 'one size fits all' approach."