Law360, London (June 9, 2020, 5:42 PM BST) -- Lawmakers have called on the Financial Conduct Authority and U.K. lenders to begin offering mortgage payment holidays that will also freeze the interest that business customers repay during the COVID-19 crisis.
The All-Party Parliamentary Group on Fair Business Banking, a cross-party body of MPs, on Monday urged the City watchdog to encourage British banks to allow businesses relief from interest payments on their loans for up to six months.
Customers have been able to apply for three-month holidays from paying their mortgage since March, which the FCA confirmed earlier in June would be extended for three extra months. Borrowers have until the end of October to apply for breaks of up to six months.
But lenders are only offering holidays on the capital element of mortgage repayments. This is usually a relatively small part of the monthly repayment, with interest usually making up the bulk, the group on fair business banking said. And lenders are not proactively offering breaks but instead are waiting for customers to request these.
"Lenders should step up support and proactively offer full payment holidays, i.e. interest as well as capital, to impacted business customers," the APPG said Monday. "Taking a full mortgage holiday is not a cheap solution as interest will still accrue on the loan. However, for businesses which have been ineligible for the other types of government assistance or for whom it was insufficient, it is an option which could make all the difference."
HM Treasury introduced the mortgage holiday scheme as part of a £330 million ($417 million) 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.
Trade group UK Finance said on May 22 that lenders have approved 1.8 million mortgage payment holidays so far.
The FCA also announced in April that lenders should offer freezes on loan and credit card payments during the pandemic. The measure was intended to provide temporary relief for bank customers who have fallen ill or 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 on loans and credit cards by the end of May.
--Editing by Alyssa Miller.
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