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Stuart Mosley No Comments

To help people who have had their circumstances changed as a result of Covid-19, the Chancellor announced a series of measures to alleviate the financial impact of losing a job or self-employed income.

For those that have had a change in circumstances as a result of COVID-19, the Chancellor had announced a series of measures to help alleviate the financial stress of losing self-employed income or losing a job.

One of the measures announced was a mortgage payment holiday. To help you understand more about payment holidays, we have more information below.

What did a payment holiday originally mean?

Although it’s called a payment holiday, it doesn’t necessarily mean what it says. The payment holiday was originally designed for customers who had a change in circumstances and could no longer afford their monthly mortgage payments. The Lender would discuss the customer’s circumstances and if they agree about a way forward, then they can suspend their direct debit for three months to give the customer time to organise their circumstance. Whilst the direct debit is suspended, the Lender would add the missed payments and the interest onto the mortgage. When the monthly payments resume, there would be an increased monthly amount to take into account in the increases in the mortgage.

This would have an effect on the customer’s credit report as it would show that they had missed three months of payments. Therefore, it may have a negative effect on the customer’s ability to obtain credit in the future.


Changes to the payment holiday

As a result of COVID-19, having a payment holiday under these measures means that you won’t need to be worried about the financial distresses and the link between the payments and your credit report. Under the COVID-19 measures, a payment holiday would not have an impact on your credit rating. However, after the three-month holiday, your monthly payments will be increased to reflect the mortgage amount and any interest in full.


Mortgage warning

When you are coming to the end of a fixed rate mortgage deal, normally your mortgage would go back to a higher rate of interest. This is when your lender may offer another mortgage deal to encourage you to stay with them. Sometimes, this is referred to as a rate switch or a product transfer and would normally be a similar rate to what you currently have been paying. Keep in mind that not all lenders may be able to offer a lower rate if you are taking a payment holiday.

When you terminate a fixed rate or other mortgage contract at a time when your mortgage will usually fall back to a higher interest rate, then your lender will normally give you another contract to allow you to hold your mortgage with it. It is often referred to as a rate swap or product transfer, which is usually an interest rate close to what you would have paid in the current contract.


Seek advice from an expert

If you’re considering taking a holiday payment, then speak to our experts and we can help you understand what a holiday payment could mean for you. It’s important to get expert advice before taking action so that you can get the best outcome. Talk to us today by getting in touch on 0121 448 0161 or you can send us an email here.


About Stuart Mosley

Stuart Mosley (CeFA, CeMap, CLTM) founded SJ Financial Solutions in June 2005 having spent 12 years with big corporates such as Halifax and Santander.  He felt the personal touch and straight speaking was missing from financial and mortgage advice services and set up SJ Financial Solutions to change this.

If you would like to book an appointment then please get in touch and we can arrange a suitable time to discuss further.  We can arrange appointments at a place and time suitable to you, we can discuss your options over the phone or if you prefer email, then this is fine with us.