STRUGGLING homeowners who get help with mortgage repayments from November will have it marked on their credit score, the city watchdog has confirmed.
Mortgage customers have until October 31 to apply for a payment break if they are unable to keep up with the bills, without it affecting their credit history.
Customers who take extra help paying their mortgage from November will have it marked on their credit scores
The first three-month mortgage holiday was announced on March 17, and it was then extended by a further three months in May.
Payment breaks are usually recorded but when the coronavirus lockdown was announced, credit reporting agencies agreed that any borrower who took up a payment holiday wouldn’t see their credit score impacted.
Those that are recorded on credit files can affect future applications for borrowing, having an impact on how much interest you pay, how much you can borrow and your chances to remortgage.
So far, roughly two million mortgage borrowers have taken out payment holidays.
The Financial Conduct Authority (FCA) said that although the majority of customers will start to pay mortgages in full from November, many will remain in financial difficulty.
For example, the furlough scheme is due to end in October and a wave of mass redundancies is expected to follow suit.
The regulator has proposed that from November, lenders should offer tailored support to customers depending on their individual circumstances.
These includes repayment term extensions, which could see monthly payments reduced but you’ll be in debt for longer.
If households need more short-term support, lenders should offer to either pause or reduce payments for a specified period to give customers time to get back on track.
Under the guidance, firms are expected to prioritise helping borrowers who are at most risk of harm, or who face the greatest financial difficulties.
The support will help households who’ve suffered a drop in income due to the pandemic, and struggled to pay their mortgages.
But under the proposals, any extra help will now be reported to credit referencing agencies again following a freeze.
Back in May, MoneySavingExpert revealed that lenders can actually see whether you’ve paused any payments through Open Banking, meaning future mortgage applications may be rejected regardless of what your credit report says.
Repossession proceedings can also start again after October 31 – unless someone in the household is self-isolating or shielding – or if there’s a local or national lockdown, the FCA said.
Lenders must exhaust all other options before starting any action.
If you’re struggling to pay your mortgage, make sure to contact your lender as soon as possible and ask for help.
Christopher Woolard, interim chief executive at the FCA, said: “It is important that consumers who can afford to resume mortgage payments should do so.
“However, we understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income.
“We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track.