In the wake of the Coronavirius Covid 19 outbreak the Financial Conduct Authority (FCA) published advice for lenders operating in the current climate. This was designed to ensure that customers remain supported and protected and that those working on mortgage provision were clear about what the FCA expected of them.
One of the main areas that the guidance addressed was payment holidays. In the guidance a ‘payment holiday’ means an arrangement under which a firm permits the customer to make no payments under a regulated mortgage contract or a regulated home purchase plan for a specified period without being in payment shortfall. At present the government are encouraging the lenders to apply 3 month payment holidays where a customer “is experiencing or reasonably expects to experience payment difficulties as a result of circumstances relating to coronavirus.”1 The lender will need to be clear with the customer the implications of taking a payment holiday in terms of a longer payment term of higher payments later in the mortgage term. The FCA guidance makes clear to firms that they should ensure that taking a payment holiday will not have a negative impact on a customer’s credit file.
The other main area of concern for customers is the possibility of repossessions. The FCA guidance is very clear on this point. “Firms should not commence or continue repossession proceedings against customers at this time, given the unprecedented uncertainty and upheaval they face, and Government advice on social distancing and self-isolation. This applies irrespective of the stage that repossession proceedings have reached and to any step taken in pursuit of repossession. Where a possession order has already been obtained, firms should refrain from enforcing it.”1 So, in the current situation the lenders have been advised not to take action to repossess a home in any circumstances.
One of the guiding principles of the FCA that is referred to in this new guidance on many occasions is Principle 6. “A firm (by which they mean mortgage lender in this case) must pay due regard to the interests of its customers and treat them fairly”2. The FCA has also committed, since the guidance was published on the 20th March, to “address continuing harm”3, and to protect mortgage holders for the next three years. Chris Woolard, the FCA’s interim chief executive, said: “At times like this, it is more important than ever that the FCA leads the way on the protection of consumers, firms and the markets.”3 This suggests that the FCA is aware that the potential for financial problems will not end when the government imposed “lockdown” ends and that customers will need to be supported as the effects of Coronavirus on employment and the economy become apparent in the longer term. We are available to discuss your personal situation by phone or now by Skype. The details can be found on our contact page.
1 FCA Coronavirus Guidance https://www.fca.org.uk/coronavirus
A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage