Coronavirus 3 month mortgage break: how will it work and how to apply

UK's major banks have agreed to give people affected by the coronavirus a mortgage break. Here's what you need to know

mortgage break
(Image credit: Getty)

The chancellor Rishi Sunak announced on Tuesday that, as a result of discussions with the UK's major banks, a forbearance plan is being put in place to help home owners struggling to make mortgage payments as a result of coronavirus.

From now on, if you are having trouble making repayments, your bank should offer you a three-month repayment holiday. The way this works is usually that your mortgage payments would be suspended for three months, and then the cost will be spread out over the remaining mortgage term. This means that your mortgage payments after the three months will go up, but only by a negligible amount. 

Be careful, however: different banks are introducing slightly different measures, so you will need to speak to them directly to work out a suitable plan for you. For example, some banks will still charge mortgage holders for missed payments, so don't just stop paying your mortgage without consulting with your bank. 

Some banks, notably HSBC, are also offering customers the option to switch to a different mortgage rate or even a different type of mortgage, for example interest only. Still others will be offering the opportunity to make reduced payments rather than switching the mortgage. 

There is also potentially good news for those who have a personal loan or credit card, as many banks are including these financial products in their forbearance policies. Again, to fully understand how your bank will be reacting, whether it's by offering deferrals on repayments or waiving fees on missed payments, you'll need to contact them directly. 

Importantly, banks are recognising that being affected to coronavirus isn't limited to falling ill, but also extends to loss of income, and will review people's requirements on a case-by-case basis. So, if you are well but are experiencing financial losses due to the outbreak, the break from repayments should apply to you.

It is unclear at this point what, if any, help will be available to renters, specifically whether the three-month mortgage break can be passed down to tenants as a rent break. Sunak is expected to make a further statement in a couple of days' time; in the meantime, if you are having difficulty paying your rent due to coronavirus, speak to your landlord as soon as possible to work out a plan.