FCA To Suggest 1 Year Mortgage Holiday Extension
In a bid to avoid repossessions, the Financial Conduct Authority (FCA) are looking at various scenarios of extending mortgage holidays for up to a year.
Although the economy is set to bounce back fairly quickly, the financial sector is concerned that the initial three month mortgage break will not be enough to prevent defaults and repossessions unless further and longer term intervention is offered, according to The Times.
The publication claims the FCA has organised a formal discussion with the banking sector tomorrow to discuss the various scenarios which could be offered to avoid home repossessions on the scale witnessed in the 1980s and 90s which could happen if the current mortgage holidays end as planned in July.
Last week, the Bank of England predicted that unemployment could double in the UK to 9 per cent by the end of 2020. Whilst experts anticipate a quick upturn once industry and business are permitted to operate at pre-virus levels, with unemployment likely to exceed three million people by the end of this year, too many homeowners will need help to weather the economic storm.
One scenario will see an extension to the payment holiday, for those who require the extension, by up to 18 months. This holiday extension may benefit those on furlough or recently made unemployed but have a proven track record of consistently making repayments. However, this option will see interest continue to accrue and may make repayments, once they restart, unsustainable and unaffordable.
Other scenarios could involve adapting mortgages from repayment to interest only options for the short term to help reduce the amount owed each month. This will also ensure interest is not piling up to unmanageable levels.
The financial regulator is also expected to suggest banks and building societies employ and train more debt advisers to pre-empt the increased levels of concerned homeowners likely to be impacted by Covid-19. The Times claim that the UK only has around a quarter of debt advisers needed to service the increased demand.