FCA Announces Next Stage of Mortgage Support; Borrowers’ Credit Could Take Hit

Struggling homeowners who have received in coronavirus relief will now have mortgage payment deferrals echoed in their credit reports.

The Financial Conduct Authority (FCA) has confirmed homeowners can continue to receive coronavirus relief assistance if they need further mortgage payment deferrals due to challenges stemming from the COVID-19 crisis.

Those facing struggles as a result of the coronavirus pandemic have been able to receive mortgage payment deferrals if they could not make their usual payments. The coronavirus relief offered a mortgage holiday for three months. This assistance was scheduled to expire on 31 October, but the FCA is extending help for those who are still facing challenges.

The FCA is insisting that people who have taken advantage of the payment deferrals in times of need still get support if they are struggling with financial challenges during the pandemic.

If homeowners have not yet taken a payment deferral, and they unexpectedly face new financial circumstances, they may use the coronavirus relief after October 31. 

The Mirror reported that according to UK Finance, more than two million payment deferrals have been accepted since late March after the coronavirus relief scheme was put in place. 

The FCA has established that homeowners will get tailored coronavirus relief, depending on their specific financial situation.

Struggling homeowners can potentially make reduced payments if they are able to, and mortgage lenders have been notified that they must put those who are highly vulnerable first.

If mortgage borrowers are facing significant difficulty, lenders have been advised to assist them in finding financial help. 

“Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time,” the FCA’s Christopher Woolard said. “Consumers in these situations will benefit from firms providing them with tailored support. However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”

But while coronavirus relief is still a priority, a major downfall is going into effect.

If a homeowner has used payment deferrals during the pandemic and needs continued assistance, it will now be reflected on their credit. Previously, customers who needed coronavirus assistance were not given a credit hit.

“Where borrowers have taken, or are taking, payment deferrals under our existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes,” the FCA said.

The mark on credit reports will apply to current payment deferral users as well as those who seek assistance after 31 October. Homeowners can still apply under the old coronavirus relief scheme, but the new guidelines come into effect 16 September 2020.

“With most parts of the economy now open for business and more consumers able to resume their usual mortgage payments, the flexibility set out for lenders today is welcome indeed,” said Fiona Hoyle, head of consumer and mortgage finance at the Finance and Leasing Association, according to MarketScreener. “There will certainly be people who will require ongoing support, but lenders can now prioritise these customers and offer solutions specific to their circumstances.”

According to the FCA’s website, the regulator will be keeping the newly updated guidance under review, as it has been throughout the pandemic.

If the coronavirus crisis changes rapidly, the FCA will continue to provide consideration for those who need support after their financial circumstances have changed. 

Do you agree with coronavirus relief consumers taking a hit on their credit? Do you think using payment deferrals during the pandemic should be forgiven on credit reports? Tell us how you feel in the comments.

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