The new measures that lenders will have to provide for mortgage borrowers who remain in difficulty due to Covid-19, including when payment deferrals expire, has been confirmed.
The Financial Conduct Authority (FCA) confirmed the measures within this next stage means firms will offer further short and longer-term support, including extending the repayment terms or restructuring mortgages. Firms can also continue to offer arrangements for no or reduced payments for a specific period.
The new guidance, which comes into effect this Wednesday (September 16), reinforces the need for firms to deliver outcomes that are suitable for the individual borrower, rather than what the regulator called a “one size fits all” solution.
The FCA explained that it will be monitoring firms to ensure borrowers are being treated in accordance to their individual circumstances.
The watchdog said it also requires firms to be clear about the credit file implications of any forms of support offered to borrowers.
The FCA confirmed the measures after a short consultation. They emerged as UK Finance’s latest figures show lenders have granted more than two million mortgage deferrals since late March. Mortgage deferrals peaked in the week ending June 5 at over 1.8 million and fell to 731,000 in the week ending August 14.
Industry data collated by UK Finance suggests that of those whose mortgage payment deferral has expired, over 70% have resumed making full payments.
Christopher Woolard, interim chief executive of the FCA, said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.
“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”
Richard Lane, director of external affairs at StepChange, said: “We agree entirely with the FCA’s assessment that many customers will continue to need ongoing support and forbearance beyond the previously agreed payment holidays.
“We are not out of the woods in terms of people’s vulnerability to financial difficulty arising from the pandemic – such as job losses that haven’t even happened yet. Public support needs to complement regulatory support; now would be a good time to consider restoring support for mortgage interest back to its previous status as a benefit rather than a loan.”