New data from UK Finance has revealed that almost 2 million (1.9 million) mortgages are currently on payment deferrals, making up a sixth of all UK mortgages.
The mortgage holiday scheme was introduced by the UK government back in March 2020 as a response to the Coronavirus pandemic. Part of an unprecedented set of measures set out by the treasury, mortgage holders were able to take a three month holiday from mortgage payments.
The new data suggests that there are approximately 300,000 more mortgages currently on a payment holiday than back in April when the data showed borrowers had opted to defer payments on 1.6 million mortgages.
On average the deferred monthly payments are £755 per month. Borrowers are now coming to the end of their three-month mortgage holiday which is due to end in June and whilst there are various support options available for those who need it, home owners who can afford to do so are being encouraged to re-start their monthly payments.
As lockdown restrictions begin to ease across the UK, the economy can slowly begin to recover. With industries reopening and workers returning to work many will be looking to restart their mortgage payments. Lenders and investors should expect many borrowers who have taken mortgage holidays to begin to return to normal, regular repayments.
For those that are unable to do so there are various offers that lenders can provide to help. Lenders will be able to offer full or partial payment holidays, a move to a temporary interest-only payment plan or an extension of the mortgage term to reduce the size of the monthly payments.
The UK government announced in May that an additional three months would be added to the payment relief period and borrowers who are yet to apply for the extension are able to do so up until 31st October. It’s important for lenders to be prepared for more applications for mortgage holidays as the months progress.
Managing Director for Personal Finance at UK Finance, Eric Leenders, said: “Lenders understand that many households will continue to see their finances squeezed as the pandemic continues, and we are working hard to ensure everyone gets the support suited to their needs.
“The industry has a clear plan to help homeowners get through these tough times and whilst it is best for customers to restart their payments if they can, where this is not possible lenders are keen to help, whatever a customer’s financial situation.”
And a final word from one of Quadrin’s resident experts:
“The real challenge ahead is as the scheme ends, lenders, in may cases, may find that they have to ‘nurse’ their customers off the scheme and back to payment normalisation. To this end, some customers will have preexisting arrears with some even having lost their jobs at the end of the period”.