Lenders across the UK have been warned to ‘go easy’ on homeowners as repossessions restart following a period of halt.
Lenders have been warned by the Financial Conduct Authority (FCA) that they must treat the 1.8 million homeowners who have taken out a mortgage holiday over the past few months fairly.
Director of Consumer and Retail Policy, Nisha Arora, told an industry conference that the majority of those who have taken out a mortgage holiday would now be able to resume payments but that there were still a significant number of homeowners who would require extra support.
The FCA has altered its advice on dealing with homeowners struggling financially three times during the crisis, helping hundreds of thousands of homeowners to avoid having their homes repossessed.
The FCA urged lenders to show those who are still struggling some flexibility and that repossessions should be the very last resort as the ban on home repossessions imposed during the lockdown period comes to an end at the end of this month.
Arora also revealed that those who have taken out a mortgage holiday should expect their credit record to be affected accordingly in order to ensure lenders have an “accurate picture” of a consumer’s financial status and history.
“We have set out that once firms have agreed a repayment arrangement with a customer, they should waive or reduce interest, fees and charges to the extent necessary to prevent the balance from escalating.
“This will help to avoid the debt becoming unmanageable for the customer and make it easier for them to get back on track” she said.
The warning to lenders comes almost a month after landlords were issued with a similar warning as repossessions on rental properties were allowed for the first time since lockdown. As of 20th September 2020, landlords were legally allowed to repossess homes once more after a holiday on the move during the coronavirus pandemic.
During the lockdown, repossessions were banned in a move to help tenants who were struggling financially as a result of the national lockdown measures. Whilst landlords are now able to resume the measures, steps have been put in place to make the system fairer and to better control it.
The new steps include existing claims issued prior to 3rd August not being listed, re-listed or referred to a judge until a reactivation notice has been served which will confirm the wish to proceed.
Certain claims will also be prioritised including those where arrears are equal to at least one years rent or where there is anti-social behaviour involved. Cases are also able to be marked as coronavirus related and landlords must show that they understand exactly how the pandemic and resulting lockdown has impacted the tenant and their dependents. Enforcement measures will not be implemented in areas where a local lockdown is in place.