Banks told to offer further payment holidays to some mortgage holders
Lenders will need to offer struggling customers the ability to continue not repaying their mortgages even after more widespread mortgage holidays come to a close at the end of October.
The Financial Conduct Authority (FCA) said that companies should offer arrangements where borrowers can reduce their payments or not pay anything back at all for a specified period to give them a chance to get back on their feet.
Lenders should also consider whether it is appropriate to offer other long- and short-term support, tailored to individual customers.
This could include a longer repayment term or restructuring the mortgage, the watchdog said.
“It is important that consumers who can afford to resume mortgage payments should do so,” said FCA interim boss Christopher Woolard.
“However, we understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income.
“We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track. Firms should not take a ‘one-size-fits-all’ approach.”
Millions of mortgage borrowers have been able to put their payments on hold during large parts of the Covid-19 pandemic, as the regulator told banks to support their customers through the tough economic times.
It has been needed as nearly three quarters of a million people lost their job since March, according to the most recent official statistics.
And many of those who have managed to hold onto their work have done so with less money, with most of those furloughed by their employer being forced to take a 20% pay cut.
Most people who have had a payment holiday are expected to resume paying back their mortgages, the FCA said, but it still recommended help for those who remain in financial difficulty.
The plans are open to consultation.