Mortgage payment holidays could add debts totalling as much as £665.08 to a mortgage, according to analysis from money.co.uk and Koodoo.

New research showed that a three-month mortgage holiday is adding on average just £11.21 per month to a mortgage, but the total cost owed by homeowners could end up much higher as a result of debt building up over time.

money.co.uk's research, in collaboration with its technology partner, Koodoo, explained that homeowners looking for help with their mortgage payments, on average, have an outstanding loan of £136,000. Based on this figure, taking a three-month mortgage holiday would see their regular monthly payments jump by £11.21 to £720.22, and based on an average 21-year term, this would cost an additional £665.08.

The calculation was based on the assumption that a customer is taking a three-month payment holiday, and the interest and principal payments during the payment holiday are recapitalised into the loan with the customer continuing to pay their current interest rate – 2.72% in this example – for the remainder of their entire mortgage term.

The numbers come as UK Finance revealed last week that one in six mortgages in the UK are now covered by a payment holiday.

At the time of its analysis, money.co.uk stated that homeowners could take a maximum three-month mortgage holiday and that the vast majority (89%) of homeowners were opting for this – over the shorter term breaks of one or two months.

With the scheme now extended to six months, money.co.uk calculated that taking the additional three-month mortgage holiday could add an additional £1,331.95 – or £22.70 per month – to the full amount owed.

money.co.uk personal finance expert, Salman Haqqi, commented: “Mortgage holidays have proved to be a lifeline for millions of homeowners, who would have otherwise struggled to meet their payments and may have faced losing their homes.

“However, our findings show that payment holidays should be a short-term fix. It’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid.

“And in most cases when a customer takes a three-month payment holiday in a 21-year or 252-month mortgage, the end date of the mortgage doesn't get automatically extended, so the customer now needs to pay back the mortgage in 249 months.

“As the nation gradually starts to open for business and furloughed workers are brought back, restarting mortgage payments should be a priority. And, if you are still able to make your payments in full, you should continue to do so.”

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