Way back in March, when the first lockdown was announced, the government worked with the financial-services sector to soften the impact on the public. The measures announced then have technically just finished (on Halloween). Now, however, another lockdown has been announced and with it a new package of measures. Here’s what you need to know.
The rules for the first lockdown
In short, the government made it clear that it expected lenders to accommodate borrowers who were struggling due to COVID19. This edict applied pretty much across the board from overdrafts and credit cards to mortgages, including buy-to-let mortgages.
On the one hand, this accommodation wasn’t necessarily as generous as the headlines might have led you to believe. In simple terms, lenders were often obligated to allow borrowers to skip payments. They did, however, generally have the right to keep charging interest.
On the other hand, it was usually fairly easy to qualify for the support. In some cases, it was enough just to self-certify that your income had been hit by COVID19. What’s more, the government stated that taking a payment holiday for COVID19-related reasons shouldn’t be recorded on a borrower’s credit record.
What was supposed to happen next?
The package of measures introduced for the first lockdown technically ended on Halloween. After this, lenders were supposed to show forbearance to those in financial difficulty and work to find a tailored solution. In other words, it was essentially business as usual, although probably with a higher level of people needing help.
This would have meant that going forward, people would have needed to have gone through the usual assessment process before being offered any help. It would also have meant that any measures would have been reflected on their credit score.
Appropriately enough, however, Halloween was also the day the government announced the new lockdown. Fortunately, the new lockdown came with a new package of measures and it is possible that further measures will be announced.
What will happen next?
The furlough scheme has been extended at its original rate of 80% of wages. Hopefully, this in itself will be enough to help the majority of people cover their housing costs, be that rent or a mortgage. Both the government and the Financial Conduct Authority have made it clear that anyone who can continue to pay should do so.
The government has also announced that mortgage payment holidays are being extended. There is, however, a catch. Mortgage holidays were only due to last up to six months. This means that anyone who applied for one at the start of the pandemic is not guaranteed to be given one now. Their lender might agree to it but they are not obliged to do so.
Similarly, anyone who took out a mortgage payment holiday at a later stage can only extend it up to a maximum of six months. After this, as the rules currently stand, they would be treated essentially the same way as anyone else in financial difficulty.
What might happen next?
This is a huge question, but there are some key points which potentially stand out. Firstly, the new lockdown could be cancelled, or at least reduced. The lockdown has been announced by the government but not, yet, agreed by parliament.
Secondly, if the lockdown does go ahead in any form, especially its current one, it’s possible that further support measures may be offered. These could include an extension of the mortgage payment holiday and/or an extension of the Stamp Duty holiday, to make it easier for people to sell properties they could not afford to people who could.
There is also the possibility that payment holidays will be offered on other products, such as overdrafts, loans and credit cards. This might make it easier to prioritise mortgage repayments.
Your property may be repossessed if you do not keep up repayments on your mortgage.