On 2 November, the Financial Conduct Authority (FCA) announced proposals to enhance support for borrowers affected by coronavirus (Covid-19).
The FCA has now confirmed updated guidance to firms setting out enhanced support that should be available to mortgage borrowers experiencing payment difficulties as a result of coronavirus.
The guidance will be fully in force from 20 November but the FCA encourages firms that are able to start providing this enhanced support sooner to do so.
What support is available?
The FCA reiterates that consumers should keep up with payments on their mortgage if they can afford to do so and should only seek support where such support is absolutely necessary. The FCA has also provided more detail on which groups of consumers will and won’t be able to access payment deferrals:
Those who have not yet had a payment deferral will be eligible for payment deferrals of 6 months in total.
Those who currently have a payment deferral will be eligible to top up to 6 months in total.
Those who have previously had payment deferrals of less than 6 months will be able to top up, as long as total deferrals don’t exceed 6 months. This includes those receiving tailored support and those who are behind on payments.
Borrowers who have already had 6 months of payment deferrals will not be eligible for a further payment deferral. Firms will provide tailored support appropriate to their circumstances. This may include the option to defer further payments.
The FCA has confirmed that firms will continue to offer tailored support to borrowers.
Sheldon Mills, interim Executive Director of Strategy and Competition at the FCA said: ‘Today we have confirmed further support for borrowers struggling financially as a result of coronavirus.
‘The announcement we have made today, ensures that the support offered through payment deferrals is as flexible and accessible as possible. This means borrowers will again be able to access payment deferrals up to a maximum of 6 months. However, if you are able to keep paying it will be in your best long-term interest to do so. Payment deferrals should only be taken when absolutely necessary.’
The FCA has also confirmed that no one should have their home repossessed without their agreement until after 31 January 2021.
Consumers will have until 31 March 2021 to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to 31 July 2021, provided these extensions cover consecutive payments, and subject to the maximum 6 months allowed. Borrowers who have not yet taken a deferral, and who think they need the full 6 months should apply in good time before their February 2021 payment is due.
Payment deferrals under these proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.
Tailored support may be reported on a borrower’s credit file, and lenders should inform borrowers where this will be the case. Any payment deferrals offered as tailored support could be recorded on a borrower’s credit file.
In October, the FCA issued separate guidance for borrowers with interest only or part-and-part mortgages whose capital repayment plans were affected by the crisis. This means that borrowers whose mortgages matured from 20 March 2020 can delay the repayment of the capital on their mortgage until 31 October 2021.
The FCA has today confirmed that as well as accessing payment deferrals before maturity, these borrowers can access payment deferrals after maturity without this affecting their ability to delay the capital repayment.
The FCA will continue to keep the support available to consumers under review.