COVID-19 mortgage holidays could mean ‘temporary’ flags on credit ratings

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Nationwide Building Society has put together a five-point support package designed to help protect the homes and finances of those who have been hit hard by COVID-19.

But the building society’s boss said that individuals who take additional payment holidays on mortgage payments should have temporary flags placed on their credit ratings too.

Nationwide said that people who are coming to the end of an initial three-month mortgage payment support period, which begins to expire in June, will have access to a range of options to help prevent those still impacted from falling into significant difficulties, whether homeowners or renters, from mid-June.

The move follows an announcement from the Prudential Regulation Authority and proposal from the Financial Conduct Authority that it said give clarity on how the sector can best support those who continue to be impacted financially due to the outbreak.

Nationwide said its plans may be adapted further to reflect final guidance in the coming weeks.

In addition to three-month payment breaks for both residential and Buy-to-Let mortgages, the Society is also enabling partial payments such as temporary interest only arrangements. In addition, no Nationwide mortgage member falling into arrears as a result of Covid-19 will lose their home in the next 12 months – until the end of May 2021 – as long as they work with the Society to get their finances back on track.

But Joe Garner, Chief Executive of the Nationwide Building Society, said that individuals who need a further payment break – which could include people who have continued to be furloughed, on sick pay, or who are self-employed – could have a temporary notice placed on their credit rating until mortgage payments returned to normal.

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Garner said that this should not be a “big black mark” but “a middle way” that would alert lenders with a temporary mark, but not restrict people’s ability to remortgage.

He told the BBC: “If someone is struggling, and if there is no sign on their credit rating, they could go out and take further and further loans, which would not be in their interest”

YouGov research commissioned by Nationwide shows more than a fifth (21%) of homeowners are worried they will not be able to keep paying their mortgage, while 14% fear they will lose their home.

Worries are even higher for renters, with more than a quarter (27%) concerned that they won’t be able to meet their rent payments, while 18 per cent worry that they will lose their home. Close to three quarters (73%) of people are worried that there will be a recession.

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