The Daily Mail / Thisismoney are writing a piece on whether mortgage ‘breaks’ or ‘holidays’ taken during the pandemic will impact a person's ability to get another loan in future, even though the holiday hasn't technically damaged the borrower's credit rating. The borrowers could be owner occupiers or landlords. Are you seeing this on the ground? Any thoughts welcome!
3 responses from the Newspage community
"Absolutely it has come up over the past year. While there is no effect on a clients' 'credit score', the moment the majority of lenders pick up that a client has taken a payment holiday it creates a real barrier and many lenders will just reject an application entirely. Their perception is that a customer has taken that holiday because they are struggling financially and as a result may be reluctant to risk lending them money on a new mortgage. The moral of the story? A payment holiday is not 'free money' as it needs paying back in the long run and it may mean having to resort to a lender that charges a higher rate of interest. In our experience, if a prospective client can ensure that they have made their previous six monthly payments in full and on time rather than having taken any payment holidays it does make life easier."
"When the scheme first launched in March 2020, some lenders, whilst acknowledging the payment holidays were not being logged as arrears, treated consumers as though they were facing financial difficulties of their own and toughened their underwriting stance. Despite their initial inertia, most mortgage lenders have generally adapted their criteria to allow consumers to access loans even when they took advantage of the Government's coronavirus mortgage payment holiday scheme. The only requirement is that mortgage payments have now been resumed by the consumer and that they are not showing any signs of struggling to meet their current financial commitments."
“Luckily, we have not had an application declined due to a payment holiday being taken. Whilst it is within the lender's right to ask if a holiday has been taken, this alone would not normally result in an application being refused. Lenders will take into consideration the applicant's overall circumstances, mainly focusing on whether the income is sustainable. They are looking closer at those who have previously been furloughed or received Government support and will want to see the borrower is now in a stable financial position.”