Homeowners impacted by the coronavirus lockdown can now extend their mortgage payment holiday. Find out more here.

The mortgage payment holiday scheme will be extended for up to six months following the news that England will go back into national lockdown from 5 November until 2 December.

The scheme had been due to come to an end on Saturday 31 October, but as a result of the new measures designed to contain the Covid-19 pandemic, borrowers who have not yet had a mortgage holiday can request a pause in repayments from their lender that can last up to six months.

The Financial Conduct Authority (FCA) has asked mortgage lenders extend the availability of payment deferrals to support borrowers who are experiencing payment difficulties because of coronavirus so that:

  • those who have not yet had a payment deferral will be eligible for two payment deferrals of up to six months in total
  • those who currently have an initial payment deferral, will be eligible for another payment deferral of up to three months
  • those who have resumed repayments after an initial payment deferral will be eligible for another payment deferral of up to three months

This means homeowners who have had their payments deferred already can extend their mortgage holiday for a further three months until they reach the six-month limit.

Some borrowers will not be eligible for the extension because they have already had two mortgage payment deferrals up to the six-month limit.

In such cases, the FCA has said borrowers who have already taken the full payment holiday but need further help should speak to their lenders to agree an alternative form of “tailored support”.

The FCA is also proposing that no one will have their home repossessed without their agreement until after 31 January 2021.

What’s the background?

A mortgage payment holiday means repayments are deferred for a specific period and during this time, a homeowner will not have to pay anything, but interest will continue to accrue and will be added to the total amount that is owed.

The mortgage holiday scheme was first implemented following the April lockdown and by October 2020, industry figures showed that 162,000 mortgage payment deferrals were in place, down from a peak of 1.8m in June.

Lenders will work with borrowers who are struggling to meet their repayments to find the best solution for them.

This includes extending the payment holiday, agreeing to reduced payments, switching them to an interest-only mortgage and extending the mortgage term.

How does a mortgage payment holiday work?

Customers whose finances have been impacted by coronavirus are allowed to take time off making mortgage repayments.

The original payment holiday was announced on 17 March and lasted for three months, but the term has now been extended to cover the latest lockdown measures in England.

Because mortgage payments are only deferred, the interest that would have been paid is added to the outstanding debt owed.

This means the missed payments will need to be made up at some point in the future.

What other options are available?

Lenders have agreed to work with borrowers to find the best solution for them.

This may be a payment holiday, or they may look at other options that could better suit their circumstances.

For example, they may agree to accept reduced payments for a period of time, switch them to an interest-only mortgage, or extend their mortgage term. This would also lead to reduced monthly repayments.

But despite this flexibility, UK Finance has urged people who can afford to keep up with or resume their mortgage payments to do so.

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.

Many lenders have set up an online application process after being inundated with requests in the early days of the scheme.

If you want to take a different option, such as switching to an interest-only mortgage, you should contact your lender directly.

Use the mortgage payment holiday calculator below, powered by mortgageholiday.co.uk, to see how your monthly payments may be affected by a holiday, and to find out how to apply:

Whether you apply online or by telephone, 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.

Can anyone apply for a payment holiday?

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, an alternative solution may be more appropriate for you.

Either way, contact your lender and discuss it with them.

Will it impact my credit score?

Getting into mortgage arrears would normally have a negative impact on your credit score. But in light of the current exceptional circumstances, UK Finance has said lenders will make sure that borrowers’ credit scores are not affected.

As a result, if you are struggling to meet repayments it is important that you get in touch with your lender and agree to a formal payment holiday.