The chancellor is reportedly devising a scheme to extend mortgage holidays for those still in financial difficulty as a result of coronavirus.
The Financial Times reports that Rishi Sunak is working with the FCA and the industry on the best way of continuing support for struggling borrowers after the scheme’s scheduled finish date at the end of June.
However, experts say it is vital that the consequences of taking a payment break are properly explained to borrowers.
Money Saving Expert’s Martin Lewis warned last week: “The FCA has confirmed, sadly, that while credit files shouldn’t be impacted by mortgage or other payment holidays, lenders are still allowed to take them into account when making their acceptance decisions.
“It’s impossible to say yet how widespread this will be or how substantial the impact will be – we’ll start to learn that over the next year.
“Each lender’s assessment process is different, it’s a dark art that’s hidden from the public and never published, so this is likely to be yet another factor applicants will need to navigate.”
But he added: “I don’t believe this should stop anyone who needs a mortgage holiday from getting one – if it’s crucial for cash flow, just do it. Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I’d err on the side of caution.”
Commenting on news of the possible extension of the payment holidays, Altura Mortgage Finance managing director Rob Gill adds: “It is always harder to unwind such schemes than to launch them in the first place.
“Given the extent of the economic downturn the country faces, and that it’s only getting started, a short extension seems appropriate.
“Just like lockdown itself however, the government needs to think about a clear strategy about how to eventually bring it to a close.”