Mortgages and Coronavirus - New Guidance for Consumers and Providers
Mortgage repayments during the coronavirus (COVID-19) pandemic can feel like a heavy burden. What can mortgage providers do to try and alleviate that burden from their customers?
On 20 March 2020, the Financial Conduct Authority (FCA) published guidance for mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators as to how their customers should be treated during exceptional circumstances such as the coronavirus pandemic.
The need for this guidance stems from Principle 6 of the FCA's Principles for Businesses which states that a firm must have due regard for its customers interest and MCOB 2.5A.1R which requires firms to act in an honest, fair and professional manner.
What does the guidance say?
Payment Holidays
If a customer is struggling financially, they are entitled to a payment holiday for the next three monthly payments. A payment holiday means you temporarily stop paying all or part of your monthly mortgage payment without being in payment shortfall. This can apply to regulated mortgage contracts or regulated home purchase plans.
Requests for payment holidays should be determined on an individual basis, and so the three-month recommendation period is not fixed. If a customer requires a payment holiday fewer than three months and it is in their interest to do so, this should also be granted.
The FCA's guidance also refers to other assistance measures, such as reducing or waiving interest.
Following a payment holiday offer:
- firms should provide adequate information to the customer in relation to the implications (if any) of the holiday, including changes to the mortgage contract or number of monthly instalments
- customers should not be subject to additional charges or fees in connection with the payment holiday
- there should be no negative impact on the customer's credit score due to the payment holiday
Repossession
The FCA has also advised that repossessions during this time of uncertainty may not be in the customers' best interest, and therefore firms should not commence or continue repossession proceedings.
In cases where a repossession order has already been obtained, firms are advised against enforcing them.
What Next?
The above reflects guidance as at 20 March 2020. The guidance will be reviewed by the FCA in the next three months following subsequent coronavirus updates and if appropriate, amended guidance will be issued extending the period of payment holidays available to customers.