When COVID-19 gripped the world and was growing quickly, the UK lockdown began. The Government asked us to stay at home unless absolutely necessary. And businesses such as restaurants, cafes, bars and gyms were told to close. 

These changes and the impact on business means many tenants would find themselves unable to pay their rent. Which means many of us landlords were concerned about how we’d pay our mortgages if the lockdown extended for long.

It was a huge relief when Chancellor Rishi Sunak made his #whateverittakes speeches announcing a whole raft of financial assistance from the government. These included that the government would pay up to 80% of salary up to £2,500 per month for furloughed staff, would make changes to Statutory Sick Pay and Universal Credit and provide assistance to most businesses including the self-employed and announced a mortgage holiday for all!

This was very welcome news as it meant that landlords had a fallback, if needed. It meant we could breathe easy. 

Or so we thought, if only the implementation was as good as the presentation!

These are the 3 things that are not being said in the glossy presentations.

1. It’s a ‘pay more for your mortgage later’

1. If it is a holiday, it’s the sort where you go away for three months, and come back to three months’ work waiting for you, plus more piling in by the day.  It’s not the sort of holiday you’d want if you really had a choice. 

I’m calling it Butlins Skegness rather than the Maldives of holidays. I  mean there’s nothing wrong with Skeggy, but wouldn’t you rather be in the Maldives?

Essentially the mortgage interest you owe during your three month ‘holiday’  continues to be added to your mortgage, which means that your post-‘holiday’ mortgage payments go up or your mortgage loan term will be extended. In short, you end up paying more.

2. Your credit file could be compromised

Although the Government has given assurances that making use of the mortgage ‘holiday’ won’t negatively impact your credit score, as frequently happens, the banks have not been as clear on this point. 

Some lenders are saying that while your overall credit score won’t be affected by a mortgage ‘holiday’, the holiday will be recorded on your credit file.

If you do decide to apply for a mortgage holiday, check the position with your lender in advance and get any commitment in writing. 

3. The Mortgage Holiday is Not Available to Everyone

This is an application process. You can apply to your lender for a mortgage ‘ ‘holiday’ but they do not have to give it to you. 

Some lenders are not offering ‘holidays’ to buy on buy to let mortgages, or where there is additional borrowing or where a ‘holiday’ has previously been taken or where people are not fully up-to-date with rent payments. Ironically the people in most financial difficulty are not eligible.

Another point to note is that if you do take a mortgage ‘holiday’ from your lender, you must pass this on to your tenants.

As always with banks, it’s a case of read the small print!

Though if you are having difficulties do contact your lender even if you are not eligible for a mortgage holiday they may be able to help you in a different way. Ask them if you are eligible for a rate switch and what products are available. This may see your payment drop following recent reduction to the Bank of England base rate.

In summary a mortgage ‘holiday’

1. Is a ‘pay more for your mortgage later’ I’m calling it the Butlins Skegness rather than the Maldives of the holiday world.

2. Your credit file could be compromised

If you do decide to apply for a mortgage holiday, check the position with your lender in advance and get any commitment in writing. 

3. The Mortgage Holiday is Not Available to Everyone

You’ll need to check with your lender what is available to you.

Due to the fast moving nature of coronavirus and daily updates from the government the financial assistance being offered by government, banks and lenders is likely to continue to change and be refined. 

The information here is intended as a guide to current information, please fully check the position for yourself before taking action.

What’s your experience of mortgage ‘holiday’s been?

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