The Financial Conduct Authority (FCA) will no longer be extending its guidance on mortgage payment deferrals, but the onus will still be on lenders to provide support to customers who are struggling, according to Quilter Financial Planning.
Commenting on the FCA’s confirmation that its guidance will come to a end of 31 October, following an extension from the original end date in June, Charlotte Nixon (pictured), mortgage expert at Quilter Financial Planning, said: “The FCA is under no illusion that the coronavirus crisis could plunge us into fresh economic difficulties and it is prepared to review its guidance surrounding mortgages to suit whatever the future holds.
“While many people will be back on track to meet their mortgage payments, huge swathes of the country will have had the rug pulled out from under them due to COVID and the mortgage industry needs to be cognisant of this as we move into the next stages of this pandemic.
Mortgage payment holidays will end on October 31 but FCA calls for continued lender support
“Assuming that the payment holidays are not extended past October, the guidance is clear that the onus is still very much on lenders to help customers get through this difficult period.”
This will include the need to take an individual, flexible approach, Nixon added.
She said: “While the coronavirus has touched everyone’s life in some form, no one’s circumstances are the same and they urge lenders to avoid a one size fits all approach, which is reassuring.
“Some of the strategies posed include allowing customers to switch to longer term mortgages to reduce their monthly payments to help deal with any change in finances as a result of the virus.”
The financial impacts of COVID-19 have thrown into sharp relief the need for dedicated financial advice.
Nixon said: “These are big decisions that could have long term impacts on someone’s finances so it is important that customers seek professional help if they can, before making any decisions like this.
“Mortgages are often the biggest single piece of debt anyone takes on in their life and it is important to make sure that any decision works both for the short and long term if possible.
“Extending the term of a loan means it will cost more over the lifetime of the product so it is a decision that requires careful thought. For most people it will only be the right move if they face imminent financial difficulty.”
Following the October deadline, borrowers’ credit files will no longer be protected in the same way, Nixon warned.
She said: “The FCA has also made it clear that those customers who have taken advantage of the payment holidays should not have this loaded onto their credit file.
“But that is changing going forward, meaning that any additional help from a lender after the end of October deadline will then start to be recorded on an individual’s credit file.
“This could impact their future borrowing capacity so it is important to exercise caution.
“Taking defensive measures now to avert a financial crisis could have a lasting impact in years to come if you find it more difficult to obtain credit when you come to remortgage.
“It’s clear that the guidance puts the customers financial and mental well-being at the heart of the next stages of how the mortgage industry deals with the fall out of this crisis.
“However, they recognise that the current holidays cannot and should not go on forever.”