Mortgage Holiday: Expert issues warning amid coronavirus crisis | Personal Finance | Finance
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Amid the coronavirus crisis, the financial situation of many Britons is changing, and many have been forced to look at their expenditure. However, some valuable, and enticing, assistance has been offered to those who are struggling to meet mortgage payments. The Financial Conduct Authority (FCA) has instructed banks to offer customers so-called “holidays” on their payments.
This involves an agreement with a lender that a customer will not have to make mortgage payments for a set amount of time.
And many have been taking advantage of the scheme, with UK Finance reporting one in nine mortgage holders in the UK have accepted a payment holiday.
However, an expert has warned customers to take caution when adopting this approach.
Nick Sherratt, Managing Director and co-founder of Mojo Mortgages, a free online mortgage broker, spoke to Express.co.uk on the issue many Britons are facing amid the pandemic.
He said: “Payment holidays are very welcome news to brokers and to mortgage customers who are in financial hardship.
“However, I would stress this isn’t an initiative to be taken advantage of. Those costs don’t go away, they are rolled up and you do pay them at some stage.
“Payment holidays should be in place for someone who really needs that and can’t afford their mortgage payments on a month to month basis.
“This needs serious consideration, and my opinion is it should be a last resort.
“You have to review your household expenditure and if you need to lean on that initiative, you should. But give it the consideration it deserves.”
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Mr Jones also stated customers should not simply cancel their direct debit, as this could lead to mounting charges.
The FCA warns any direct debit cancellation without consultation of a lender will count as a missed payment.
This could severely affect a person’s credit file, and may impact their ability to remortgage.
During payment holidays, borrowers will still be charged interest on payments.
And after the holiday comes to an end, payments will still be due, with borrowers required to come to an agreement with their lenders on how the money will be repaid.
If not planned for, these charges could snowball, leaving people unequipped to deal with their finances.
Financial and mortgage experts advise discussing varying options with lenders in order to come to the correct decision for the individual.
The FCA is also offering additional support and assistance during the coronavirus.
It has instructed lenders to temporarily stop repossession action, meaning Britons are not currently at risk of losing their home.
Mortgage lenders are currently experiencing high levels of demand due to frequently arising questions.
Borrowers are therefore being asked to consider whether their query is urgent before contacting lenders.
More information can be found at mojomortgages.com
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