Mortgage Payment Holidays – FAQs for everyone

With so much uncertainty within the market we wanted to ensure our readers have accurate information to follow as the tabloids appear to be blowing a lot of areas out of proportion. We hope you find this useful.

By all means, send in your questions if there is something, we have not covered below

Are payment holidays for everyone?

No – Payment holidays are only for customers who are in financial difficulty. Your lender has discretion to accept or decline you for a payment holiday.

Are payment holidays free money?

No – You get a 3 month break from payments, but this has to be paid back at sometime, so lenders are either adding the extra 3 months to the end of your mortgage term, or when you return to making payments, these will be higher to cover the 3 month break provided.

If you ask for a payment holiday, does your lender puts you on a standard variable rate?

No – If you are currently on a fixed rate, your lender does not put you on their variable rate BUT there are implications of being on a payment holiday (see next question)

I need a payment holiday, but my current rate is expiring, is this going to cause me issues?

Potentially Yes – If you are ready to consider buying, moving up the housing ladder or just looking to remortgage, chances are your mind has already turned to the task of getting a loan to make this happen.

If your rate is due to expire in the coming 9 months, we advise you speak to a mortgage broker before requesting a payment holiday (We are available to assist if this helps?). Some lenders are granting payment holidays, and if your rate expiries within the payment holiday, they will not agree a “rate switch” or new product for you, leaving you on the variable rate. You also cannot apply for a remortgage to a new lender if you are on a payment break, so you may be left on the variable rate. We are aware of lenders who will not consider a new rate for you until you have made 6 months’ worth of payment after the payment break has finished.

Is it true that lenders are not doing valuations on purchases or remortgages?

TRUE – Lenders are doing their best to adjust to the new world they find themselves working in and doing online valuation assessments where possible.

However, there are certain scenarios where a physical valuation is essential, and these will not take place until the lockdown has been lifted.

Is it true that lenders are no longer lending?

FALSE – There are nearly 100 lenders in the UK mortgage market, and some of them are not coping as well as others. There are still plenty of lenders who are still offering mortgage options to new clients.

Will lenders have limited what areas they will lend in?

TRUE – We have seen some lenders withdraw from specific areas, like new builds, buying schemes, specialist buy to let etc. This is because they want to focus their time and resources on the standard market – the mortgages that ensure people still have their homes.

The Bank of England Base Rate is so low, so I must be able to get a much lower rate?

FALSE – To cope with the changing market, lenders are not releasing low rates, as they are all trying to control the levels of business they have coming in.

Tracker rates must be a great option now – should I exit my fixed rate and take a tracker instead?

FALSE – A lot of lenders have withdrawn their tracker rates and the options that are left now have higher margins above the base rate. Example, a month ago the lowest tracker was 1% above base (1.75%) and today the lowest tracker is 1.49% above base (1.59%).

Is a product transfer (or rate switch) with my existing lender is the best option for me now?

Not necessarily – There are still millions of clients who are continuing as normal, and it is always best to review your situation with a broker.

Taking a new rate with no advice can mean you are not on the best deal, or your onward plans have not been taken into consideration. If the best option is with your current lender, our advisers will always give you the honest advice, and be able to proceed with a rate switch for you. We have had instances recently where our advisers have access to lower rates with your current lender than they are offering you directly.

We wanted to move, and now we can’t – but our rate is due to expire. Do we stay on the variable rate?

If you stay on the variable rate short term, there will be no penalty for you to move when the time is right. Variable rates can be expensive, however there are a lot of rates in the market that have no exit penalties, so your adviser would help you explore these options and come up with a solution that works best for your timescale for moving.

Is there any point looking to buy a new home now?

Not really, as the lockdown is preventing viewings. Our advice to clients is to sit tight, and review this again with your adviser when they lockdown has been lifted.

If I already have an application in with a lender, will this be ok?

Lenders have waived their usual application timescales, as they understand it may be a few weeks before valuations can be carried out. As long as you have provided your adviser with all of your documents, and no delays are coming from your side, there should be no reason why your application does not move forward albeit at a slower pace.