Coronavirus changed conditions drastically in the UK, and lockdown happened. The mortgage industry was one of the most prominent places to come under the effect of the big chaos. The mortgagors were and are still in jeopardy due to colossal financial issues. Their capacity to pay the mortgage installments came in question.
Payment Holiday Was A Big Help
To help people cope with the problems, the mortgage payment holiday was announced in the same month of March. The response was instant and significant in number. 1.9 million people across the country obtained a payment holiday.
Many of them were almost penniless, and their finances were on the verge of sinking. It is not an exaggeration to say that how conditions are not going to be normal soon. In such circumstances, the payment holiday helped amazingly.
But For Many, The Holiday Period is About To End
Those who were in a fix in their finances took the facility. However, now most of them are in the end phase of their mortgage repayment holiday. Although the lenders are providing an extension to this holiday period, they favor suggesting the borrowers find an alternative. They have asked their associated brokers to forward the same message to those who took mortgage through them.
Those Who Want To Increase The Mortgage Holiday Will Pay More On Rates
From an online mortgage broker to the mortgage providers, all are doing the same job. They are trying their best to make the mortgagors understand the impact of payment holiday on their calculation of interest rates. According to an estimation, it adds £25per month. More they will increase the ‘mortgage break’ duration, more they will increase their loan cost. There will be considered in the monthly repayment. Those with a shorter tenure have to bear bigger installments.
When people are not paying the installments, they add in their interest rate, which naturally increases to the total cost of their loan. This is why the lenders want their borrowers to consider working on another way of making repayments in place of extending their mortgage rest period.
THE MANY OTHER FACTORS THAT WORK BEHIND THE SCREEN
The concern of the mortgage lenders on the payment holiday is apparent now. But it is not only the financial crisis of the borrowers working as an important factor but also some others. The mortgage companies are affected on a large scale, and there are many reasons for that. Knowing about them can help a lot to understand the current scenario in a better way.
UK home loan applications dropped 90% since the start of COVID-19
The lenders are insignificant strain because the most sought after mortgage type home loan request has fallen drastically. They are in a massive loss, and it is complicated to get back to normalcy. In such situations, if the existing borrowers will keep extending the payment holiday, the mortgage companies will be in big trouble.
Income assessment is quite complicated for a payment holiday
After all, many people have lost their jobs. Those who are on the furloughed income are also uncertain about their job. Lockdown is not much strict now, and people are going out for work. However, that cannot bring back the good days for those who are in danger due to career threat.
Brokers and lenders have many dos and don’ts now to follow while scrutinizing income for a mortgage payment holiday. Already, it is difficult to trust the repaying capacity of the borrowers at the time of their first payment holiday. If they apply for the next one, situations can be even more difficult. The lenders’ major fear, what if the borrower fails to pay even after that and a default happens?
The Conclusion From The Above Scenario
The bigger picture tells that it is actually in favor of the borrowers if they drop the idea of the extension of the mortgage payment holiday. However, numerous people still are in difficulty, and the revival is a long-term target. The last decision is on the two factors 1) discretion of the borrowers and 2) the policy of the lender on the mortgage holiday.
Summary– The mortgage payment holiday, which acted as the last-minute savior for the countless borrowers, may work expensive after extension. The lenders and brokers suggest that the mortgage holders not extend the payment holiday and try to get back to the regular repayment routine.