Help for homeowners
The government has agreed with mortgage lenders, that people in financial difficulties because of coronavirus, can apply to their lender for a three-month mortgage holiday.
How does a mortgage holiday work?
Payment holidays are designed to help with short-term cash flow issues only; you will continue to owe the capital amount and interest will accrue. In other words, you still have to pay back the money you do not pay during the holiday.
Repayment options vary from bank to bank, but generally either the length of the loan will increase slightly or the missed payments will be added to the total mortgage, meaning repayments will go up. With a long-term mortgage this may not make much difference, but the maths could work against you if you have only a few years left.
As Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “It’s not a freebie – you are just deferring paying. You should not take a holiday if you don’t really need one.” He continues: “It’s about prudent planning. You don’t want to be left suddenly high and dry and really worrying. So take a holiday if you need one – but if you are sitting on savings, maybe dip into those for a couple of months first.”
Use a mortgage calculator tool, such as this one at Moneyed.co.uk, to see what your repayments are likely to be.
How to apply
Homeowners should apply directly to their lender, which will specify if applications should be made online or over the phone. If it’s the latter, be prepared to spend time on hold: call centres currently have fewer staff but are handling unprecedented call numbers. According to one broker, a lender told them they normally receive around 25 requests for payment holidays a month. Last week, they received 1,600 in just one day. According to UK Finance, the banks’ trade body, lenders had approved over 1.6m payment holidays by 24 April, meaning around one in seven homeowners have now taken advantage of the scheme.
Do not be tempted to just stop paying your mortgage
If you do this, you will be deemed in arrears and your credit score will be adversely affected. Agreed payment holidays will not affect your credit score.
You do not need to have coronavirus to be eligible, nor will you need to provide evidence your finances have been impacted. Lenders hold information on your job and earnings from when you first applied for the loan, and most are allowing customers to self-certify. However, you must be up to date with all mortgage payments and not already in arrears.
Lenders will also check that a holiday will not make future mortgage payments unaffordable. Providing a mortgage holiday is not compulsory, and there is no guarantee you will be approved. But as Harris, notes: “If you ask for one, chances are you will get it.”
What else is on offer?
Lenders have agreed with the government to try and help customers who are struggling because of coronavirus. Payment holidays are the main plank of this, but your lender may have other ways to help, including waiving late fees or offering reduced payments. Some will also let customers extend mortgage terms or switch to different deals. At least two high street banks are offering to shift mortgages onto a 12-month interest-only deal, which could significantly reduce monthly outgoings.
Your first port of call should be your lender, but also consider discussing your options with a mortgage broker, including whether remortgaging might work better than a payment holiday. For ones local to you, see unbiased.co.uk. Starling Marketplace partner Habito, an online mortgage broker and lender, has also published a series of helpful blog articles on mortgages and coronavirus.
Keep an eye on government websites: with the situation changing daily, information is constantly being updated.
Help for renters
Talk to your landlord
The government has temporarily halted evictions (see below), but it also wants landlords to work with tenants to establish what it calls “reasonable” repayment plans that take into account individual circumstances during the pandemic.
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institute of Chartered Surveyors, the industry body, says some tenants and landlords are finding the current conditions very difficult.
Jeremy says: “Renters disproportionally tend to be younger and self-employed, and they are struggling. Many are asking for improved terms, some justified, some not, but most landlords are sympathetic. He adds: “The biggest enemy of the landlord is a void; no landlord wants to see a property empty. Some rent is better than none in the current climate and it’s very difficult to re-let property currently. So it’s in both renters and landlords’ interests to sort it out.”
Announcing measures intended to help tenants and landlords during the crisis, housing secretary Robert Jenrick was clear: “No renter who has lost income due to coronavirus will be forced out of their home.”
All court proceedings for eviction have been put on hold, regardless of when the landlord applied to court. This means that neither cases already in the system, nor any about to go into it, can progress to the stage where someone could be evicted. This suspension will last for 90 days from 27 March, meaning it is impossible to be evicted before the end of June.
The notice period for evictions has also been extended. Emergency legislation has been introduced stating that all landlords in both the social and private sectors must give three months’ notice if they want to evict tenants. This applies if you get notice on or after 26 March 2020. They cannot apply to start the court process until after this period. (That initial notice period is six months for tenants in Scotland.)
This will apply until 30 September, and the government has said that both that date and the three-month notice period will be extended if needed.
Buy-to-let mortgage payment holidays
The three-month mortgage payment holiday, initially introduced for households, has been extended to buy-to-let mortgages. Borrowers must not simply stop paying their mortgage, however, and should instead apply to their lender, as detailed above. The credit score of landlords who take a payment holiday will not be affected, but they are expected to pass the relief onto tenants.
Says SPF Private Clients’ Harris: “If your tenant isn’t paying rent you may not have enough money to pay the mortgage. But hopefully, landlords are not relying on rent alone. We always advise people to have an emergency fund, for voids or unexpected work.”
As with homeowners, keep an eye on government websites for any updates (see above). Housing charities such as Shelter also have a wealth of advice for renters in England and Scotland, with Shelter Cymru covering Wales.
As coronavirus locks down the economy, homeowners and tenants alike are in uncharted territory. But some help is available – just make sure you pick up the phone and get it.
The above is intended as general information and does not constitute advice in any way. You should take independent advice if you have any questions about your specific circumstances.