COVID-19 is unprecedented and has far reaching implications on us all. One of the measures put in place by the Government is the ability to apply, with your mortgage lender, for a “payment holiday”.
This briefing note is a simple, overview of the current situation of the payment holiday and overview of how lenders are reacting at present.
Broadstone are not mortgage specialists and content in this document should not be construed as mortgage advice. We strongly recommend that you seek appropriate advice in relation to matters through a mortgage specialist or your lender.
What is a mortgage payment holiday?
A mortgage payment holiday is when your monthly mortgage repayments are paused for a set period of time. Under the government’s policy, you can apply for a maximum of two, three month payment holidays.
The Government has announced that the availability of mortgage payment holidays has been extended and you will now have up to 31 January 2021 to apply.
Am I eligible for a payment holiday?
Mortgage payment holidays are available to all homeowners who are up to date on their mortgage payments and have been financially affected by the coronavirus pandemic. The following rules apply:
- If you currently have a three month payment holiday in place, you can extend this for a further three months.
- If you are yet to take a payment holiday, you are eligible for two payment holidays up to a
maximum of six months in total.
- If you have previously taken a payment holiday and have resumed repayments, you are eligible for an additional three month payment holiday.
You will not be eligible for a further mortgage holiday if you have already had two payment holiday’s totaling six months.
Will I pay more in interest?
In short, yes. You owe the same amount as you do now, but interest will continue to accrue. This means it will take you longer and cost you a little more to clear your mortgage. After your payment holiday, you may be able to increase your mortgage payment to account for the time you have not been paying off the mortgage. You will need to speak to your lender about this directly.
Can I apply if I am not financially affected by COVID-19?
If you are not concerned about your ability to pay you should continue with repayments as normal. Most lenders will require you to demonstrate that the mortgage is not affordable due to your financial situation being affected by COVID-19.
How do I get a payment holiday?
You need to contact your lender directly to discuss your available options. It is advisable to check your lenders website in the first instance due to the volume of calls they are likely to be receiving. Do not cancel your direct debit before you speak to your lender to request a payment holiday. If you cancel the direct debit, this will be considered a missed payment rather than a payment holiday. The missed payment would then be registered on your credit file.
What are lenders doing?
- The Property Market is open – viewings, valuation, surveys and home moves are all allowed provided that Covid-secure guidelines are followed.
- Stamp Duty Land Tax – the government has temporarily increased the SDLT threshold to £500,000 meaning that buyers in England and Northern Ireland will not pay any stamp duty on the first £500,000 of the property purchase value. This applies until 31 March 2021.
- Land and Buildings Transaction Tax (LBTT) & Land Transaction Tax (LTT) – In Scotland the LBTT threshold has temporarily increased to £250,000. Likewise in Wales, the LTT threshold has increased to £250,000 – both will apply until 31 March 2021. In Wales however, unlike the rest of the UK, the tax break only applies where no other property is owned and not to additional property purchases.
- Interest Rates – The Bank of England has cut the base rate to 0.1% leading to reduced mortgage interest rates.
- Deposits – some lenders are requesting larger deposits than Pre-Covid due to the ongoing uncertainty.
This is based on our understanding of the current position as this is a rapidly evolving situation and further development or change cannot be ruled out.
Broadstone are not mortgage specialists. We strongly recommend that you seek appropriate advice in relation to matters through a mortgage specialist or your lender.
Some useful links below:
https://www.which.co.uk/news/2020/04/coronavirus–how–to–apply–for–a–three–month–mortgagepayment–holiday/ https://www.moneyadviceservice.org.uk/en/articles/mortgage–payment–holidays https://www.moneysupermarket.com/mortgages/coronavirus–mortgages/ https://www.fca.org.uk/consumers/mortgages–coronavirus–consumers