Three-month itch? Beware homes hitch

Many mortgage payment holidays taken to help with coronavirus hardship will come to an end this month, with some homeowners tempted to take out an extension.

The UK Government announced in March that people up to date with payments could apply for a three-month break. Some mortgage lenders have indicated extensions will be offered, now that the original 12-week period is ending. Consumer groups warn that doing this could affect future credit applications. Which? said: “Lenders may be able to determine whether someone has taken a payment holiday and use that information when assessing a credit application.” Payment holidays may not automatically appear on credit reports or negatively affect your score, but there are ways lenders could see you have taken one. This is because your record will continue to be updated during the payment holiday and will show the latest balance each month. So, if large debts have built up you could find it difficult to take on new borrowing. Lenders can also use other methods to see whether people have temporarily stopped payments, signposting if they have taken a payment holiday. To ensure your credit report and score are kept safe, consider the following:

• Keep making regular payments until you have discussed your position with your lender.

• Discuss with your lender whether you need a payment holiday or extension and agree the length of time that these measures should last.

• Check your credit report and score every month and if you spot mistakes or arrears building up while a freeze was agreed, contact the lender.