FCA Extends Mortgage Breaks Amid COVID-19

By Lucia Osborne-Crowley
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Law360, London (June 2, 2020, 4:39 PM BST) -- Britain's finance watchdog said Tuesday it is extending mortgage breaks for U.K. consumers who are struggling to pay back their loans due to the economic fall-out from the COVID-19 outbreak.

The Financial Conduct Authority said it is giving any mortgage-holders still suffering from financial difficulty due to the coronavirus pandemic an extra three months free from repayments. It also said that any consumers who have not yet applied for a mortgage holiday have until the end of October to do so.

"The measures we have confirmed today will mean anyone who needs to can get help from their lender, if they are still struggling to pay their mortgage due to coronavirus," Christopher Woolard, interim chief executive at the FCA, said.

Woolard added that if customers are now in a position where they can begin repaying their mortgages, they should do so. 

The regulator also announced Tuesday that its ban on lender repossession of homes will continue until Oct 31.

Lenders should reach out to customers to discuss what will happen when their payment holiday ends, the FCA said, adding that banks should offer a range of options for how customers can repay the missed payments.

Banks should also contact consumers who have had a three-month payment holiday to see if they require the additional three-month extension. The watchdog confirmed that making use of payment holidays will not affect a person's credit rating.

The FCA urged banks and lenders to be particularly aware of the needs of vulnerable consumers as the country tries to recover from the COVID-19 outbreak. For example, banks should make sure any customers who cannot access digital banking services are offered an alternative.

The extension announced Tuesday only applies to mortgages, the FCA said, and does not cover other credit or loan products.

The FCA announced in April that lenders should offer three-month freezes on all loan and credit card payments during the pandemic. The measures were intended to provide temporary relief for bank customers who have fallen ill, been laid off or furloughed during the global pandemic and are struggling to make repayments. British lenders had agreed to 1.5 million payment holidays by the end of May.

In April, the regulator announced new rules to force banks and lenders to freeze payments and interest on high-cost credit products such as payday loans. The measures hit pause on payments on car finance, rent-to-own contracts and buy-now-pay-later and freezing payments as well as interest for payday loans.

While the extensions confirmed Tuesday will not apply to these products, the FCA said it will give updates on these payment holidays in the near future.

--Additional reporting by Najiyya Budaly. Editing by Alyssa Miller.

For a reprint of this article, please contact reprints@law360.com.

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