On 17 March 2020, as the country teetered on the brink of lockdown, the Chancellor announced that homeowners struggling financially due to coronavirus would be able to take a three-month mortgage payment holiday.

What does this mean for me?
The extended application deadline now coincides with the end of the furlough scheme. This means, if your workplace makes you redundant as the furlough deadline approaches, you will still be able to apply for a mortgage holiday, giving you some breathing room while you search for another job.

One issue with the original scheme was that borrowers were likely to see their monthly repayments increase immediately following the holiday period, as the mortgage term remained the same. The new flexibility introduced into the scheme means that you’ll now have the chance to extend your mortgage term instead of stopping payments altogether, meaning that your outgoings will remain more level (albeit over a longer duration).

Is a mortgage payment holiday right for me?
A mortgage payment holiday does not equate to free money. The capital outstanding does not reduce, and interest will continue to accrue on your remaining debt. This will make your repayments larger once the holiday period ends or, if you’ve chosen to extend your mortgage term, you’ll end up paying more interest than you would have across your original term.

The decision to apply for a mortgage holiday should therefore not be taken lightly. If you think you can afford to continue making repayments, then it is probably best to do so to avoid a longer-term impact on your finances.

Talk to us
If you are experiencing financial difficulties, talk to us before making the decision to apply for a mortgage holiday. We can help you assess your finances and assist you in creating a plan for getting through this difficult period.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Key Takeways

• On 22 May, it was announced the mortgage payment holiday scheme’s application deadline would be extended until 31 October
• New flexibility was also introduced, allowing borrowers to extend the holiday period up to six months, or extend their mortgage term in exchange for smaller repayments
• This has various implications for borrowers, as the application deadline coincides with the end of the furlough scheme
• However, a mortgage payment holiday should not be confused with free money
• The capital outstanding will remain unchanged and interest will still accrue
• Therefore, you should think very carefully about whether you need to take a mortgage payment holiday.