Chancellor Rishi Sunak is said to be in talks for an extension of the mortgage holidays scheme, which will give struggling homeowners a longer break on their repayments during the pandemic.
The initiative, confirmed in March and due to expire at the end of June, was initially introduced to pause payments for three months during the coronavirus outbreak.
However, the government is now in discussions to prolong the scheme for borrowers who may face a “cliff edge” in June when the relief ends, according to the Financial Times.
More than 1.6million mortgage customers have so far taken advantage of the relief from making payments.
The banking body, UK Finance, estimates this is an average of £755 a month.
But it is not free money. It will still have to be paid back later on with interest charges on top, though your credit score will not be impacted by it.
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The problem the Treasury is grappling with is that a sudden end to the scheme could produce a cliff-edge effect for those who are still out of work or subject to pay cuts because of the pandemic.
A spokesman for the financial regulator, the Financial Conduct Authority (FCA,), said: “We are currently considering what support will be needed for customers reaching the end of a mortgage payment freeze. We have not yet made any final decisions but we will make an announcement soon.”
One idea is that the mortgage scheme would be extended for a further three months with the rules on applications tightened.
Money expert Salman Haqqi,, said: “The government’s initial launch of mortgage holidays brought welcome relief for homeowners who had their income affected by the COVID-19 crisis.
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“The scheme, where payment could be deferred with zero negative impact to credit ratings, resulted in up to one in nine homeowners making use of the initiative. Though a formal announcement is yet to be made, many businesses are still closed and the full extent of job losses is still becoming clear, so any extension to the scheme will be welcomed.
“Should homeowners wish to look into a payment holiday on their mortgage, it’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid. This means that your monthly payments will likely go up slightly after the payment holiday ends.
“While the option to take a payment holiday on mortgages will have been a lifeline for many, if you are still able to make your payments in full, you should continue to do so.”
Mirror Money has contacted the Treasury for a statement.
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