Chancellor expected to announce mortgage holiday extension

Chancellor, Rishi Sunak, is believed to be planning an extension to the scheme offering three-month mortgage payment holidays, according to reports.

Several news outlets, including the Financial Times, have reported that Sunak is in talks with regulators and banks to extend the mortgage holiday scheme beyond the end of June, to help borrowers in financial difficulty as a result of the COVID-19 pandemic.

In April, UK Finance revealed more than 1.2 million mortgage payment holidays had been offered by lenders in the first three weeks of the scheme’s announcement on 17 March, with 1.6 million offered as of 24 April. The trade body suggested the average mortgage holiday holiday was amounting to £755 per month of suspended payments.

However, with the respite from early mortgage holiday applicants due to end in June, and the Chancellor’s recent warning that the UK is facing “a severe recession the likes of which we have not seen”, an extension announcement is expected soon, though the length of the extension and how the Treasury will fund the scheme remains unclear.

On the potential extension to the scheme, personal finance expert at money.co.uk, Salman Haqqi, commented: “The Government’s initial launch of mortgage holidays brought welcome relief for homeowners who had their income affected by the COVID-19 crisis.

“The scheme, where payment could be deferred with zero negative impact to credit ratings, resulted in up to one in nine homeowners making use of the initiative. Though a formal announcement is yet to be made, many businesses are still closed and the full extent of job losses is still becoming clear, so any extension to the scheme will be welcomed. 

“Should homeowners wish to look into a payment holiday on their mortgage, it’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid. This means that your monthly payments will likely go up slightly after the payment holiday ends.

“While the option to take a payment holiday on mortgages will have been a lifeline for many, if you are still able to make your payments in full, you should continue to do so.”

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