Customers who’ve come to the end of their existing mortgage deal can move to a new one, even if they’re currently on a payment holiday or have been furloughed.
More than 1.6 million homeowners whose finances have been impacted by coronavirus have been given mortgage payment holidays.
One out of every seven mortgages in the UK is now covered by the scheme, under which people are able to suspend their repayments for up to three months.
The move is saving the average homeowner £755 per month, according to mortgage trade body UK Finance.
Lenders are also allowing customers who have come to the end of their existing mortgage deal to move to a new one, even if they are currently on a payment holiday or have been furloughed.
Under normal circumstances, customers who were not up to date with their regular mortgage payments would not be allowed to transfer to a new deal.
Stephen Jones, UK Finance CEO, says: “Lenders understand that many households are seeing their finances squeezed due to the coronavirus pandemic and we are working hard to help customers get through these tough times.”
What is a mortgage payment holiday?
On 17 March, the chancellor Rishi Sunak said mortgage lenders had agreed to allow customers whose finances had been impacted by coronavirus to take a payment holiday of up to three months.
But the mortgage payments are only deferred, and the interest that would have been paid is added to the outstanding debt owed, while the missed payments will need to be made up at some point in the future.
More than 1.2 million payment holidays were agreed during the first three weeks of the scheme.
How do I apply for a payment holiday?
If you want to apply for a mortgage holiday, go to your lender’s website and follow the link on coronavirus.
After being inundated with requests in the early days of the scheme, many lenders have set up an online application process.
You will need your mortgage details to hand, including your account number, but you will not need to prove that your finances have been impacted, as lenders are allowing people to self-certify this.
Do not cancel your direct debit before the payment holiday has been agreed, as this would be classed as a missed payment and could impact your credit history.
A payment holiday is only available if you are not in mortgage arrears and have suffered only a temporary drop in your income, rather than a long-term reduction in your earnings.
If you face longer-term financial issues, contact your lender and discuss what alternative solutions may be available that would better suit your situation.
What if my current mortgage deal is coming to an end?
When your mortgage deal comes to an end you would usually automatically be put on to your lender’s standard variable rate, which typically charges a significantly higher interest rate, unless you remortgage to a new deal.
If you do switch to a new deal, you would have to go through new affordability checks and people who had been furloughed or who were on a payment holiday would not qualify.
Under the current circumstances, however, lenders have agree to waive these rules.
Stephen Jones says: “The industry has acted quickly to support homeowners through this crisis and has taken decisive steps to ensure that eligible customers on payment holidays due to COVID-19 can opt for the security of fixing their monthly mortgage payments going forward.”