Flexible approach is needed for borrowers

IT was great to see, as mentioned above, that the Financial Conduct Authority has set out its new guidance to mortgage lenders, confirming that borrowers should now be eligible for a six month payment holiday if they need it.

I don’t think it will be that last time that the FCA will have to do this.

I can’t see everyone being back on an even keel financially by the end of March the way things are currently looking.

There are a couple of issues that are worth pointing out about the new arrangements.

It’s true that missing mortgage payments under the payment holiday scheme won’t have an impact on your credit rating, the FCA has been clear to point this out, but that doesn’t mean that your ability to get credit in future won’t be impacted if you take advantage of a payment holiday.

Lenders might look at the fact that you had to take a holiday from mortgage payments as an indication that your finances are not watertight, which should be obvious otherwise you wouldn’t have had to take a holiday in the first place.

This might mean that lenders will not be willing to look at further advances or new mortgages if you apply for them in the future.

There is no fixed policy on this since lending decisions are down to individual banks and bolding societies. But it would be useful if the FCA took a stronger line on this issue and gave lenders better guidance on how to deal with new applications once the current crisis is over.

It seems unfair that borrowers should be penalised through no fault of their own for an issue that might only have lasted a couple of months.

At the same time, it’s important that creditors take a flexible approach to borrowers facing difficulty with personal loans and credit card payments as well as mortgages.

Borrowers should be able to approach any lender to whom they owe money and have a sensible conversation with them about how that can suspend or defer payments until they are back on their feet.