While the payment holidays are certainly helping those in need of financial assistance in this period of uncertainty, those coming off of a fixed mortgage rate faced reverting to the lender’s more expensive Standard Variable Rate (SVR). Yesterday, UK Finance announced help in the form of Product Transfers.
1 in 7 mortgages in the UK are currently on mortgage payment holidays, following the introduction of support from the Government and UK Finance, a significant amount compared to ‘usual’ times. Historically, borrowers on Mortgage Payment Holidays would not qualify for product transfers, but UK Finance has announced this rule will be waived for those affected by COVID-19.
Any borrower who has requested a payment holiday, or who has been furloughed, will now be eligible for a product transfer. A product transfer will allow the borrower to move to a new product with their existing lender on a like for like basis (i.e. keeping the mortgage balance the same). The benefit of this for the borrower is that the lender uses previous affordability assessments and thus does not re-underwrite the mortgage using current income levels.
Stephen Jones, CEO of UK Finance, said: “Lenders understand that many households are seeing their finances squeezed due to the coronavirus pandemic and we are working hard to help customers get through these tough times.
“The industry has acted quickly to support homeowners through this crisis and has taken decisive steps to ensure that eligible customers on payment holidays due to Covid-19 can opt for the security of fixing their monthly mortgage payments going forward.”
“There is a range of support available to mortgage holders concerned about their finances. We would encourage any homeowners impacted by coronavirus to visit their lender’s website in the first instance to find out more information and how to apply.”
Jeni Browne (Sales Director, MFB) said “Whilst some lenders agreed to product transfers for those borrowers who had taken a payment holiday or had been furloughed, this was certainly not the case for all. This caused the situation where someone who was already under financial pressure was facing the prospect of their mortgage rate ending and having to accept their lender’s standard variable rate, rather than taking a new product which would have been cheaper for them. This meant further stress and pressure for these borrowers. The news that all lenders will allow product transfers, even for those who are midst a payment holiday or on furlough, is incredibly welcome, and we thank the lending institutions for supporting their customers.”
If you are on a payment holiday and you are coming to the end of your fixed term mortgage, we can help! Call our team on 0345 345 67 88 or email email@example.com.