They think this could help struggling borrowers during the cost-of-living crisis…
Lenders should increase awareness of the option for borrowers to take a mortgage payment holiday if they are struggling to keep up with their repayments.
This idea was expressed by brokers in response to questioning about what challenges they thought their clients would face in the next two years, and, consequently, what support brokers would like to see lenders offer.
The suggestion was made as part of Smart Money People’s twice-yearly Mortgage Lender Benchmark, which dissects the state of the mortgage industry according to the views of 650 brokers.
Smart Money People noted that the promotion, and therefore the awareness, of mortgage payment holidays, had declined since the pandemic. At its peak, around one in six UK mortgages was on a payment deferral.
Brokers believe that many borrowers may not realise that payment holidays are still an option if they are in financial difficulty, particularly as lenders have reverted to assessing each payment holiday on an individual basis, rather than taking a blanket approach as was more the case during the height of the pandemic.
Read more: How will the cost-of-living crisis impact the mortgage market?
Mortgage payment holidays, otherwise known as payment deferrals, became mainstream in March 2020 as a measure to give borrowers a temporary break from their mortgage commitments if they were struggling to pay. The initial period was three months with a cap of six.
“We know that mortgage holidays were hugely popular during the pandemic and brokers are suggesting that lenders could remind customers about this financial cushion again now, rather than waiting for them to get into arrears,” Jacqueline Dewey, chief executive at Smart Money People, said.
“Brokers will be hearing firsthand from their clients about just how hard the cost-of-living is biting and can see that lenders have a great opportunity to help those for whom inflation is having the most impact. However, it would be crucial to ensure that support is targeted at those who really need it and not a handout to those who don’t.”
The Mortgage Lender Benchmark highlighted that brokers were keen to see lenders be creative and flexible in other ways too, such as an increased tolerance for underpayments, a move to interest-only payments for a period, or extending the term of the mortgage to reduce payments, as all three options show that the borrower is still committed to their mortgage.
“Perhaps lenders don’t need to wait to be instructed by the government to make a difference to their struggling borrowers,” Dewey said. “Many brokers believe that the pandemic provided lenders with a whole framework of financial support options which could be deployed now to help those who are experiencing hardship.”
