In these unprecedented times both mortgage lenders and borrowers are encountering new situations and potential challenges to their usual mortgage arrangements. Here we seek to clarify the current position for those with a mortgage secured against property.
On 20th March the Financial Conduct Authority (FCA) issued new guidance to clarify the standards and behaviour now expected of the lenders that they regulate, which follows the government’s recent raft of measures announced to help support borrowers during this challenging time. The guidance includes advice that mortgage lenders should grant borrowers a payment holiday on sums owed under existing mortgages. Initially this will be for a period of 3 months in instances where the borrower experiences payment difficulties as a result of coronavirus (Covid-19).
Any borrower wanting to arrange a payment holiday should contact their mortgage lender to establish the measures that will apply to their particular loan. Some lenders, such as Barclays have confirmed that initially these measures will only be available for residential mortgages, however others, such as Nationwide have confirmed that repayment holidays will be available for a wider group of borrowers, including to buy-to-let landlords to help alleviate pressure on both landlords and tenants from the financial impact of Covid-19. For banks and lenders this has the added effect of reducing the risk of having ‘bad debt’ on their books in the event that borrowers are unable to keep up with repayments where a repayment holiday is not offered.
The FCA guidance then goes on to confirm that during a mortgage holiday there should be no additional fees or charges applied to the loan other than additional interest.
Finally, the FCA have advised their members that in the current circumstances, they do not consider that repossession of properties from renters in either social or private accommodation will be in the best interests of the customer. As such any lender seeking to repossess a property within these categories during this time should only exercise this right where they can clearly demonstrate that the customer has agreed to this course of action being in their best interests.
The above is intended as a brief guide only and should not be relied upon as specific legal advice. The details are correct as at 24 March 2020.
If you require further advice regarding secured lender or any other Real Estate matter, please contact Steph Richards in our Real Estate department. You can also email your query to email@example.com or firstname.lastname@example.org , call 01276 686222 or visit https://www.herrington-carmichael.com/.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.