Update on mortgage payment holidays
On 17 March 2020, as the country teetered on the brink of lockdown, the Chancellor announced that homeowners struggling financially due to coronavirus would be able to take a three-month mortgage payment holiday.
On 22 May the scheme was extended and widened to support millions of homeowners: — The deadline for applying for a mortgage holiday was to be extended until 31 October 2020, potentially supporting borrowers until January 2021 — Homeowners would be permitted to take a break of up to six months, rather than just three — Borrowers were now allowed to reduce their monthly payments in exchange for a longer mortgage term, rather than stopping payments altogether.
What does this mean for me?
The extended application deadline now coincides with the end of the furlough scheme. This means, if your workplace makes you redundant as the furlough deadline approaches, you will still be able to apply for a mortgage holiday, giving you some breathing room while you search for another job. One issue with the original scheme was that borrowers were likely to see their monthly repayments increase immediately following the holiday period, as the mortgage term remained the same. The new flexibility introduced into the scheme means that you’ll now have the chance to extend your mortgage term instead of stopping payments altogether, meaning that your outgoings will remain more level (albeit over a longer duration).
Is a mortgage payment holiday right for me?
A mortgage payment holiday does not equate to free money. The capital outstanding does not reduce, and interest will continue to accrue on your remaining debt. This will make your repayments larger once the holiday period ends or, if you’ve chosen to extend your mortgage term, you’ll end up paying more interest than you would have across your original term. The decision to apply for a mortgage holiday should therefore not be taken lightly. If you think you can afford to continue making repayments, then it is probably best to do so to avoid a longer-term impact on your finances.
Talk to us
If you are experiencing financial difficulties, talk to us before making the decision to apply for a mortgage holiday. We can help you assess your finances and assist you in creating a plan for getting through this difficult period.
Here at Kings Group, our offices are back in operation from 9am to 6pm as we continue to adhere to our Covid-19 policy. For more information on how we can assist you on your buying journey, please contact one of our branches today.
If you wish to sell before you buy, we also offer a free and instant online valuation to give you an idea of how much your home could be worth on the current market.
