UPDATE
In 2023 with rising mortgage rates, see Worried about the cost of your mortgage? Find out the help your lender can offer.
In 2020, all mortgage lenders will provide a three-month mortgage payment holiday for borrowers whose household finances are affected by coronavirus.
By May 2020, 1.8 million people had taken a mortgage payment holiday.
If you have already had one and your finances are still affected, you can now ask for a further three months until the end of October.
Contents
Ask your lender for a payment holiday
You have to ask your lender for this, a lender can’t apply it automatically because they don’t know if you are affected by Coronavirus. And not everyone who is affected will need the payment holiday.
It doesn’t have to be you who is directly affected – it could be your partner or someone else whose income helps pay the mortgage.
Lenders’ websites explain what you have to do. If you have a joint mortgage, it is likely that both of you will have to agree to the mortgage holiday.
Banks may differ in what they need to see show that you are affected, but it is usually pretty easy. You don’t have to be sick and you aren’t going to be asked to produce any medical evidence. For example:
- show the lender any emails from your employer about reduced hours, being furloughed or being made redundant;
- explain if your child’s school is closed;
- if you are self-employed, just give a short statement about how your business has been affected.
Some banks may suggest alternatives to a payment holiday that could be better for you if you can make some payments over the next few months.
For example, Barclays suggests some people may prefer to switch to an interest-only mortgage for a year. If you know it will take time for your income to get back to normal this could be a good option for you.
Interest is still charged – what happens at the end of the break?
Interest is still being added on – you just aren’t paying it during the break.
At the end of the break, you can ask for a second three month payment break if you need it or you can resume mortgage payments.
At that point you will need an arrangement to repay the payments you have missed and the small amount of extra interest you will have been charged.
The two main options are either to extend your mortgage term by three months or to spread the missed payments over the rest of the mortgage term. Talk to your bank about whether you have a choice between these.
Most banks are suggesting that the payments are spread over the rest of the life of the mortgage, see this article for some examples.
There is a calculator here that lets you see how much your monthly payment may increase if you choose to repay the three or six months missed payments over the current term of your mortgage.
If you have many years left on the mortgage, this isn’t usually too much extra.
But if there are only a few years to go, tell your bank if the larger payments will be more than you can afford and ask to have your mortgage extended by three or six months instead.
This won’t affect your credit score, but…
In May when the FCA (who regulates the lenders) announced that people could get another three months payment holiday if they need one, they explained what happens to your credit record with these breaks as follows:
“Under our guidance, firms should not report a worsening status to credit files if you take a payment freeze. This should help make sure that there is no long-term negative impact on your credit file if you are able to get back on track at the end of a payment freeze…”
So a break or a reduced payment will not show as a “missed payment” or a “default”. And the payments you have missed will not show as “arrears”.
But the FCA added:
“You should also remember that credit files aren’t the only source of information that lenders can use in lending decisions. Factors other than payment history may also be relevant.”
These “other factors” include:
- the details of the payments you make will be on your credit record;
- some lenders make checks on credit applications including trying to verify your income;
- some lenders, especially mortgage lenders, ask for bank statements;
- some lenders ask for access to your bank details through “Open Banking”.
So the FCA is pointing out that even though your credit score will not be affected by taking a mortgage break, when you apply for credit in future some lenders may be able to see that you had problems over this period.
Mortgage payment holiday FAQs
Should I take a mortgage holiday so I can clear other debt?
That’s a hard question.
If you don’t pay your mortgage for 3 months, you can pay off a lot of an expensive credit card debt, or clear your overdraft. Which will save you money each month on interest.
Sounds sensible? There are two big problems with this…
- If you get into problems later and can’t pay your credit card or overdraft, you can simply get a payment break. But if later on you can’t pay your larger mortgage, your house is at risk.
- If you go on to spend more money on the credit card or your overdraft, it’s very easy to just end up with a lot more debts this way, not pay it off faster.
Unless you are VERY sure your finances will soon be normal again and VERY disciplined to not run up the debts again, it isn’t a good idea.
What if my mortgage fix is ending during the payment holiday?
Unless you can get a new fix, when a fixed rate ends, you go back to paying some other variable rate – for most mortgages, this is your lender’s Standard Variable Rate.
You should assume that you won’t be able to remortgage with a different provider when a fixed rate has ended if you are in the middle of a payment holiday.
Your current lender may be prepared to offer you a new fix. Or you may have to wait until the end of the payment holiday to be offered one.
You can get some help if you already have mortgage arrears
You will be offered help. But what that help is will depend on your situation.
If you already have a plan in place with your mortgage lender to repay arrears, you need to talk to the lender about how that can be changed because of a fall in your income over the next few months. The FCA, who regulates mortgages, says:
Customers in payment shortfall should not receive less favourable treatment than other customers.
This is what one reader reported in the comments below this article:
they have done a ‘concession’ which appears different from a payment arrangement in that our arrears, as reported to the credit reference agencies, will not get worse despite paying back less than a standard monthly payment. And the capital we are not repaying will not be chased for once we are back on an even keel, it will just get spread right over the remaining term. So that’s not bad.
“Can I get a payment break if I am in an IVA?”
Yes, you can. An IVA will have wrecked your credit score but that is irrelevant – your lender still has to offer a payment break. You can also get a break from your IVA payments, see IVAs and Coronavirus.
Should you take another mortgage payment break?
If you don’t need the break and you know your finances will be fine as you expect to be back at work soon, then it’s probably best to not take a further payment break:
- interest does build up and it will increase your repayments in future;
- future lenders may be able to see you took a break even though your credit score is not affected.
But if you can’t pay this, or it would be difficult and you feel unsure about whether your income will soon be back to normal, then the second payment break is simple to get and will give you much needed support in this difficult time.
What if I can’t get back to normal payments at the end of the second 3 months break?
At the end of August the FCA said it was proposing that when the second 3 month mortgage payments breaks ended, lenders would have to offer “tailored support”. That isn’t yet definite, but it will mean that there is no automatic thrid payment break for people with problems.
The regulator has banned lenders from going to court for repossessions until the end of October 2020.
If you know you won’t be able to pay the mortgage when your payment break ends, you will need to talk to your mortgage lender. But first talk to a debt adviser – don’t delay while your situation gets worse.
Contact your local Citizens Advice or phone Shelter.
Mortgage problems? what are your options
Will your credit score really be safe?
Where to get good debt advice
Village Idiot says
Hi all,
The government has announced that there will be a 3 months mortgage payment holiday for those struggling. I’m wondering how that would go if you already have mortgage arrears? We are 2 months plus in arrears. I know no-one will know the answer, just asking people to take educated guesses, will they refuse to add to our arrears? In other words say we are ineligible through already being in debt? How will they report this to the credit reference agencies?
Being in 5 1/2 months arrears sounds scary to me. But my partner is self employed in an area likely to be laid to waste by coronavirus, so we may well be about to lose nearly half our income and in need of drastic remedies.
Thank you.
Sara (Debt Camel) says
At a guess lenders will be very slow to take action against you over the next 3 months.
But I think both of you should be talking to your credit cards and any loans asking for payment holidays.
Sam Smith says
We were originally told by our lender, Barclay’s, that they weren’t offering a mortgage holiday even after the government announcement. Then they updated their website to say they were, but when I called the number there is a recorded message saying they aren’t able to offer them right now and it could be several days before they have worked out the details. I got a message online saying I should keep checking their advice online ‘over the next few weeks’ for updates.
I feel really let down. We are both freelancers and our contracts have been cancelled or postponed. We’ve not earned much over the last two weeks and aren’t expecting to earn much over the next 4 weeks. We can’t speak to anyone and don’t know what to do.
Sara (Debt Camel) says
Sorry to hear that :(
But I wouldn’t be surprised if the same is happening with most mortgage lenders at the moment.
I am confident that this is just teething problems – the banks need to work out how the 3 month payment holiday will work in practice so they can describe it to you. They may also need some proof that you are affected by coronavirus – I hope they will set a low bar for this and take almost anything eg email from whoever your contracts were with cancelling them.
By this time next week I hope they will be geared up to talk to a very large number of their mortgage customers.
I hope you have applied for Universal Credit and Council Tax Support. And if you have other debts, thought about asking for payment arrangements for them too, see article above.
If you have a payment coming up in the next few days, you should consider stopping the Direct Debit if paying it will leave you too short to get through the rest of the month. That must feel very scary, but the government and the banks have been clear that people with mortgages WILL get help.
Chris Bone says
Do you think recalculating ongoing mortgage repayments following the record drop in interest rates (which could clearly save money also) will be put on the back burner whilst lenders deal with potential high volume mortgage holiday requests?
Sara (Debt Camel) says
Not that many mortgages have their interest linked to Bank of England base rate, but I would expect those that do will have their rate changed in the normal sort of timescale. This will be a simple change automatically applied to these mortgages, it shouldn’t require any customer-by-customer changes.
Dinusha says
Hi
What happens to tenants who are renting. Is there any update what will happen if they are out of work or asked to go on no pay leave because of the virus and no income because of it?
Sara (Debt Camel) says
The government has announced a ban on evictions for 3 months. And you may be able to claim some benefits. See https://debtcamel.co.uk/coronavirus-can-you-pay-debts/
brendan says
I’ve triednto get through my my mortgage provider 3 times and now on hold for Well over an hour, I can’t see me getting through today and I have a payment coming out next week which I really would not like to make as it will leave me extremely short for essentials, I work in hospitality
Sara (Debt Camel) says
who is your lender?
brendan says
It was platform funding, part of the Co op bank, I’ve actually got through and I have got the 3 months break, it was quite painless really, will give me a little bit of breathing room and time to access my finances, I have to say its really shown me how much money I have wasted on pointless things
Village Idiot says
We are in mortgage arrears, our lender said they couldn’t do a payment holiday due to that, but they have done a ‘concession’ which appears different from a payment arrangement in that our arrears, as reported to the credit reference agencies, will not get worse despite paying back less than a standard monthly payment. And the capital we are not repaying will not be chased for once we are back on an even keel, it will just get spread right over the remining term. So that’s not bad.
We are paying back the interest component plus a tiny bit more. That was affordability assessed on my salary alone with the assumed complete loss of my partner’s self employed earnings. They wouldn’t include the unsecured lending we have in the calculation, which I understand.
Sara (Debt Camel) says
That sounds a fair offer in the circumstances. do you mind saying who the lender is?
I think you have a credit card where you have been getting the persistent credit card debt letters (https://debtcamel.co.uk/credit-card-pay-more/)? In which case I think you need to ask them now to accept a token payment and freeze interest.
Village Idiot says
Nationwide.
Thanks.
Jacqui says
Question would this apply if your behind on your payments?
Sara (Debt Camel) says
You can’t get the simple “3 month mortgage holiday” if you are currently behind. But talk to your lender and see what they say – see the comment just above from “Village idiot” who was in arrears and who has just reached a reasonable agreement with Nationwide.
Terry Linford says
Evening all,
We have a mortgage with precise that is finishing April and then move back to high street.
I have tried to call precise over 3 days with over 1.30 hours on hold 6 occasions and still not got through.
I will try again tomorrow.
I need to take the 3 months holiday period given by the government as I work in the motor industry and very much commission based with a low Salary.
I have emailed them with my concerns also.
Has anyone spoke to precise over the last couple days and any feedback.
Cheers all and stay safe
Sara (Debt Camel) says
They are a small lender. probably no-one reading this has asked them.
But providing a 3 month payment holiday is NOT optional for mortgage lenders. Their regulator has told them they should give it to customer with coronavirus problems. See https://www.fca.org.uk/news/press-releases/new-guidance-mortgage-providers-lenders-coronavirus.
You just have to persevere!
Marie says
I have just spoken to the Yorkshire bank whom i have a payment arrangement in place with for an additional £200 on top of my mortgage payment a month. I requested this to be looked at as my partner is furloughed and his lowered contribution would cause a problem (not me as i am a key worker) and this would affect the £200 payment as agreed. By the time i came off the phone i was still told to pay the £200 and if this payment arrangement was broken they could and would start foreclosure. I understand that my partner is not on the mortgage but expected some understanding during this time. Not sure how i am going to find this money with my partner reducing his contribution to me. Depressing time.
Sara (Debt Camel) says
Here is the FCA’s guidance to mortgage lenders about offering three month payment breaks: https://www.fca.org.uk/firms/mortgages-coronavirus-guidance-firms
There are three bits of that that that are of particular interest:
“An example of a situation in which a payment holiday may be appropriate is where there is or will be a reduction in household income that can be used to make mortgage or home finance payments.”
So it doesn’t have to be your income that is affected, your partner’s furlough has affected the household income and that is what matters,
This guidance applies in respect of a customer regardless of whether they are in a payment shortfall. Where a firm is already taking or has taken steps under MCOB 13 in relation to the customer, the firm should consider whether further complementary measures to help the customer are appropriate in light of this guidance. Customers in payment shortfall should not receive less favourable treatment than other customers.
So they can’t refuse to help you because you have a payment arrangement.
Firms should not commence or continue repossession proceedings against customers at this time, given the unprecedented uncertainty and upheaval they face, and Government advice on social distancing and self-isolation.
I think it’s poor for them to threaten something they know they can’t do.
Marie says
Thank you sara. I did mention that they should be looking at taking a reduced payment (as i was going to pay something just not the £200) but it was as though she was just reading from a script and my arrears payment is due by this Thursday. All emails that i had sent regarding my situation were ignored until i had a message to ring them on friday evening but was at work when the voicemail came through. I shall see what i can do about getting the money this week so the arrangement doesn’t fail but with another mortgage payment due on 28th this is putting a lot of pressure on me. I will ring them again to advise them of the fca guidelines and if they say the same thing again i will send off the complaints form. Thank you for your advice.
Sara (Debt Camel) says
So what can you do…
If you have had an email reply about your request for a mortgage payment break, you could reply to that with the first line being “I wish to make a COMPLAINT about your refusal to allow me a 3 month payment break”
If you don’t have an email, then you can send a complaint to them using their online form.
You should say you think they have unfairly refused to let you have a payment break and have threatened to start possession proceedings if you do not keep up with your payment arrangement. Say your household income has dropped as your partner is being furloughed. Say you have read the FCA’s guidance https://www.fca.org.uk/firms/mortgages-coronavirus-guidance-firms and it says that people in arrears should also be helped and that a lender cannot start possession proceedings during the current problems.
Say you want them to reconsider their decision urgently or you will be taking your complaint to the Ombudsman and also reporting them to the FCA.
Paul says
Hi I have 24 years 8 months left on my mortgage with current monthly payments of £638. I’m currently in a 2 year fixed rate deal charged at 2.74%. That deal expires at the end of Oct 2020 when I will then speak to Halifax again and look at going onto another fixed deal for a couple of years. If I take a 3 month payment break now (May, Jun, Jul) will any arrears be added to the remaining current 2 year fixed deal (Aug, Sep, Oct) meaning my payments will shoot up or will it be added to the 24 years 5 month I will have left?
Sara (Debt Camel) says
You need to talk to Halifax about how you want to pay the arrears. Three possible options are to add three months onto the end of the mortgage term ie taking it to 24 years 11 months. Or to repay it with additional payments spread ofer the 24 years and 8 months or to repay them over a shorter period.
The shorter the period you repay them over, the less this will cost you in added interest. So if you can repay over say 5 years you may prefer that to 10 years or 14 years.
but there is no reason why they should have to be repaid by the end of your current fix and I would be surprised if Halifax suggested that.
Scarlett says
Pre corona house worth £500K
1 mortgage Santander £100K interest only (3k penalty if settled next 2 years) £135/month
1 mortgage United Trust £30K repayment £250/month
£20k owed to Natwest personal loan £450/nth
£15k between overdraft/store/credit cards £700/month
If I could sell at £500k best ways I’m left with £335k
Was self employed Barber from last year so got no help
Managed to find temping job only at £1200 after tax and then Universal Credit is going to be approx £570 top up as have 3 kids.
I need a min 3 bedrooms due to kids sex and ages and average house price for a 3 bed semi in this area is 400k. So would need to move further out. Not ideal with 3 teenagers.
Should I sell and cut my losses? Buy a smaller property as no mortgage potetential?
As I was on universal credit only for 6 weeks from 16th March all payment holidays end in June and I choose to pay debt or eat?
Sara (Debt Camel) says
There is a middle way – you could look at paying the two mortgages in full but making reduced pay to the unsecured debt.
I’m not saying this is better than selling up… a lot depends on what price you could get. Living without a mortgage would be a blessing…
But talk to StepChange about the possibility of a debt management plan so you have looked at all the options: https://www.stepchange.org/how-we-help/debt-management-plan.aspx.
Raj says
Hi
I have been getting my monthly salary
I only work part time
Because of if Covid 19 household expenses have gone up I have 3 kids at home and elderly father.
I applied for a mortgage break and granted it.
I am in a IVA – my question is do I need to tell My IVA company I have had a 3 months mortgage break? I am worried IVA might say I have had extra income due not to paying mortgage ?.
My mortgage payment brake ends in 01 July 2020
Sara (Debt Camel) says
Roughly how much have your expenses gone up?
How large are your mortgage payments?
How large are your monthly IVA payments
Raj says
My expenses have gone up roughly £200 a month kids meals and and some bulk buying to avoid going out due to having a vulnerable person at home. Also been buying extra cleaning products sanitizer hand wash disinfectants to make the house safe for kids.
My mortgage is £520 per month and
IVA is £108 per month – I am up to date with payments.
My IVA term finishes next year 2021
Should I tell them about the 3 months mortgage break or not ? will they increase my monthly IVA payment? I am not sure how it works?
Your reply would be greatly appreciated
I am really stressed out about this.
Sara (Debt Camel) says
Yes this must be very stressful.
I don’t know if your IVA firm will spot the mortgage payment break at your annual review or not. But if they do find out and are upset, you may wish you had told them earlier.
I can’t guess what your IVA firm will do if you tell them about the mortgage payment break now. What you have done doesn’t seem that bad to me.
If you tell them, you should explain about your expenses going up and that at the time you took the break, you didn’t realise that you could have asked for an IVA payment break instead… So taking the mortgage break meant you didn’t need the IVA break.
You can also say (if this is correct?) that you have enough money to get you through the next three months without another mortgage payment break and without asking for an IVA payment break.
Those are all positive points.
Paul says
Hi there I am in this similar situation to Raj with my IVA My daughter is primarily with her mum, but with shifts I work, I have her alot in the week, so my shopping has gone up and other costs since she has not been going school, whilst she is with me for her days and overnights… I am still receiving a full time wage, however I have also been made aware my roof is in desperate need of repair, which could cost a couple of grand.
I have taken the mortgage holiday too which is saving me £430 a month to put towards my roof and to assist with extra food bills etc. My daughters mum works full time too and when I asked she informed me that she has not been eligible for the school food vouchers which confused me. So not even getting them, plus I am still paying my £186 a month child maintenance aswell.
My annual review is up for around Sept/Oct for them requesting my online details like bank statements etc for my December deadline… I am wondering will they know if I never said anything my my incomings and outgoings on my statements as I am due go start paying my mortgage again at the end of July, or is it worth informing them as I don’t want to get in trouble with them.
Worrying times,
Thanks,
Paul
Sara (Debt Camel) says
I can’t guess what your IVA firm will ask for. If they use open banking or ask for a year of bank statements, they will see that you have had the mortgage payment holiday.
As your finances have been affected by coronavirus you could have asked for a payment holiday on your IVA.
In general it is better to be open with your IVA firm about your problems and its a shame you didn’t talk to them earlier. That doesn’t really help you decide what to do now. But I don’t know if you can manage the mortgage repayments? Or how much money you need for the roof? Or what other alternatives you have.
Paul says
Hi there Sara, thank you so much for your reply. Like Raj says, this is crazy and stressful times. Thank you for your advice and hope your keeping well.
brendan says
My mortgage holiday ends in the 25th June, I’ve had 2 letters from my mortgage provider but nothing say anything about the option to extend for a further 3 months , I could possibly start paying again but things would be tight as I’m not working over time, has anyone been able to extend Thiers again do you know
Thank you
Sara (Debt Camel) says
who is the lender?
do you expect the overtime will increase later?
brendan says
I’m with platform funding, yes I believe my overtime would come back, but just another 3 months would allow me to get abit more prepared
Sara (Debt Camel) says
I thought they were a mortgage broker?
I suggest you ask for a further extension .
brendan says
Its part of the co-operative bank, it was an automated system so hopefully it will be ok , thanks
Steve says
HI Sara
I am on my second payment holiday with Santander, I was in arrears when I took the payment holiday but Santander are refusing to add the arrears to the payment holiday. Is there anything I can do to get them to do this as this would be very helpful. I am already on their SVR so paying much higher interest but can’t remortgage with them to a lower rate because of the arrears. Paying back will take over 12 months. Any help greatly appreciated
Sara (Debt Camel) says
I think it would help if you talk to a debt adviser about your whole situation. Mortgage arrears are serious (as I am sure you know) and you need more than a general pointer as to what is normally best…
I suggest you phone National Debtline on 0808 808 4000
M Parker says
I had a 3 montg payment holidsy agreed with my lender. Prior to this i was just over 2 months in arrears. I agreed to pay these arrears off in full which I did.
I also recommenced
payments,after the holiday ended. Now the lender is saying that any payments paid within this capitalisation period are to be taken off the payment holiday and this is down to Government guidance. So i now find myself more in arrears than i was befire lockdown and agreeing to pay the arrears in full
The lender is now taking me to court for repossession with a court date fixed for jan 2021.
Are they correct?
Sara (Debt Camel) says
I’m sorry to hear that. You need an adviser to work with you through the details of your situation, whether the lender is treating you fairly and what your options are. I suggest you talk to your local Citizens Advice or phone National Debtline on 0808 808 4000.