Mortgage holidays have been a popular coronavirus relief move with home owners, millions of whom have taken advantage of the opportunity to defer mortgage payments for up to three months, without their credit rating being affected.
There are signs, however, that this sympathetic approach to mortgage holidays may be coming to an end, with the chief executive of the Nationwide Building Society Joe Garner voicing concerns about the huge losses lenders are experiencing as the result of Covid-19 measures.
In fact, Garner has explicitly called for mortgage holiday extensions to be recorded against a home owner's credit rating – although he stopped short of saying it should be a permanent record. A temporary mark that would prevent people who are already struggling from taking out further loans would suffice, according to the Nationwide CEO.
And, appearing on This Morning, money saving expert Martin Lewis also warned home owners against taking mortgage holidays lightly, explaining that
'mortgage companies will be looking to see if you have taken a payment holiday. They can’t do it from your credit file, but they can use things called open banking or your payment history.'
Mortgage payment holidays were introduced back in March to help mortgage borrowers who found themselves in financial difficulties due to the pandemic. The emergency move was not designed for those who weren't struggling (mortgage holidays always have been available to borrowers on request, although they typically are recorded in a borrower's credit file and can affect future borrowing).
From the lenders' point of view, however, a mortgage payer taking out a payment holiday as a precautionary measure rather than because they can't pay is preferable. The payment extension should give respite to families who are struggling the most with repayments and need more time to recover financially, but it's becoming apparent that mortgage lenders are likely to count this against them.
Our advice? If you are planning on remortgaging any time soon, don't take the mortgage holiday extension if at all possible. On the other hand, if you're struggling to make repayments and haven't yet taken advantage of the payment holiday, you can take one. it seems that while lenders will be tolerant of a three-month holiday, in accordance with the official policy, a six-month mortgage holiday will not be met with the same degree of understanding.
Remortgaging or switching to a different type of mortgage might be a better option for some borrowers. We've teamed up with online mortgage expert Habito – use their free mortgage comparison tool below.