Should the mortgage holiday scheme have been extended?
Banks warn that some homeowners may struggle to repay additional debt
Up to 70% of homeowners who have taken mortgage holidays do not need to extend their payment breaks and are racking up unnoticed debt, Britain’s banking industry has warned.
UK Finance, which represents more than 250 firms in the sector, has written to the Financial Conduct Authority (FCA) warning that plans to extend payment pauses for another three months are not in the “best interests” of customers, says The Times.
Interest on mortgages continues to accrue during mortgage holidays and “there are concerns that borrowers could run into difficulties when faced with the bigger interest bills”, the newspaper adds.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The approved mortage-breaks period was due to end in June but was extended earlier this week to allow borrowers to defer payments for up to six months, after the Treasury voiced concerns that an “abrupt end to the scheme could produce a cliff-edge effect”, according to the BBC.
Christopher Woolard, interim chief executive at the FCA, said that if customers could afford to restart mortgage payments “it is in their best interests to do so”, but that “where they can’t, a range of further support will be available”.
However, as YourMoney.com warns, “it’s not free money and many people may not realise the true cost of taking a break from their monthly payments”.
According to the financial information site, homeowners looking for help with their mortgage payments have an outstanding loan of £136,000 on average.
And “while a three-month mortgage holiday only adds an average of £11.21 per month to a mortgage, the debt builds up over time and could add £665.08 to the amount repaid in total”.
Salman Haqqi, a personal finance expert at money.co.uk, said that although mortgage holidays have “proved to be a lifeline for millions of homeowners”, it was “important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid”.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Can AI tools be used to Hollywood's advantage?
Talking Points It makes some aspects of the industry faster and cheaper. It will also put many people in the entertainment world out of work
By Anya Jaremko-Greenwold, The Week US Published
-
'Paraguay has found itself in a key position'
Instant Opinion Opinion, comment and editorials of the day
By Justin Klawans, The Week US Published
-
Meet Youngmi Mayer, the renegade comedian whose frank new memoir is a blitzkrieg to the genre
The Week Recommends 'I'm Laughing Because I'm Crying' details a biracial life on the margins, with humor as salving grace
By Scott Hocker, The Week US Published
-
How new bank transfer scam protections could help you
The Explainer Banks must now refund up to £85,000 of losses from authorised push payment fraud
By Marc Shoffman, The Week UK Published
-
What is early direct deposit and how does it work?
The explainer Next time you are in a financial pinch, this option can get you early access to your paycheck
By Becca Stanek, The Week US Published
-
How can students and young people start building credit?
the explainer Young adults usually don't have a credit score — but there are several ways they can begin to build credit in preparation for their financial future
By Becca Stanek, The Week US Published
-
The personal check is on the way out. Here's what to use instead.
The Explainer A growing list of retailers, including Target and Whole Foods, no longer accept personal checks as payment
By Becca Stanek, The Week US Published
-
Is it worth switching banks for a sign-up bonus?
The Explainer An immediate cash bonus may sound great, but there is a lot to consider before jumping ship
By Becca Stanek, The Week US Published
-
Should couples have a shared bank account?
The Explainer Weigh the pros and cons to determine whether sharing a bank account is right for you and your partner
By Becca Stanek, The Week US Published
-
How to avoid check fraud this holiday season
The Explainer A record number of suspicious activity reports tied to check fraud this year has put banks on high alert
By Becca Stanek, The Week US Published
-
What to do if your bank closes your account and how to avoid it
The Explainer There are steps you can take to prevent the nightmare scenario of an unexpected closure
By Becca Stanek, The Week US Published