Lenders have granted 1.9 million mortgage payment holidays due to the Covid-19 pandemic – accounting for one in six mortgages, UK Finance data shows.
The amount being deferred is typically £755 per month.
Eric Leenders, managing director of UK Finance, 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.”
UK Finance said that borrowers who can afford to resume payments should do so, because it will be in their best interests in the long run.
People can apply for a payment deferral until 31 October 2020.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “While the headlines are all about one in six borrowers taking a mortgage payment holiday, it is encouraging that the vast majority are not subject to a payment deferral. Of those who have opted for a payment holiday, how many are in actual need? We have come across borrowers taking them because the option was available and they were worried about running out of money, whereas support from the furlough scheme meant this didn’t come to pass.
“Lenders are contacting borrowers to find out their intentions for the next deferral window – whether they want to take another payment deferral, start repaying the usual amount again or make partial overpayments to correct the shortfall. There are several options available and it will be interesting to see what happens at that point. Borrowers should ask for advice if they are unsure.
“While UK Finance correctly refers to a payment deferral, the terminology is not the same across the board. Even now some lenders are still referring to it as a payment holiday, which might give borrowers the wrong idea.
“It remains to be seen what happens at the end of the next three-month period. By October the furloughed/employment/unemployment picture may be a little clearer – will the government then expect lenders to offer the deferral again?”
This post has originally been featured in Property Wire.