Law360, London (May 22, 2020, 12:01 PM BST) -- Homeowners struggling to keep up with their mortgage payments because of the coronavirus pandemic will be granted debt relief for another three months under government proposals published Friday.
The Treasury's "mortgage holiday" scheme, which has been taken up by more than 1.8 million borrowers, was launched in March and had been due to end in June. But homeowners can now continue to defer payments until the end of September or start paying smaller amounts.
The Treasury said it is concerned that an abrupt end to the scheme could produce a cliff-edge effect. Homeowners who had taken a mortgage holiday should restart making payments if they can, although the scheme is being extended to help those still struggling with the impact of the coronavirus outbreak.
"We're doing everything we can to help people with their finances at this difficult time, and that includes making sure people get the support they need with their mortgages," John Glen, economic secretary to the Treasury, said. "That's why we're working with the banks and lenders to extend payment holidays if people need them."
The government said new applicants for the scheme can continue to request a mortgage payments break until Oct. 31. An existing ban on home repossessions during the crisis will also be extended until then.
The government said people in that scheme would be contacted by their lender to discuss a way forward.
The Financial Conduct Authority published new draft guidance for lenders on Friday.
"We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice," Christopher Woolard, the FCA's interim chief executive, said.
The regulator also said that banks should consider pointing customers coming to the end of their payment break toward sources of debt advice. Mortgages will have to be paid back later, so some customers will face higher bills.
The regulator is seeking responses to its proposals by May 26, with guidance to be published shortly after.
The update does not apply to credit cards and other credit-based products. These are covered in separate guidance that will be revised "in due course," the regulator said.
The mortgage holiday scheme is part of a £330 billion ($400 billion) Treasury rescue package to help the country survive the economic fallout from the pandemic. The government has also set up funds for businesses at risk of collapse to give them access to state-backed and guaranteed loans.
--Editing by Ed Harris.
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