The Financial Conduct Authority (FCA) has confirmed updated guidance to firms setting out “enhanced support” that should be available to mortgage borrowers experiencing payment difficulties because of Covid-19.

The guidance will be fully in force from 20 November but the FCA encourages firms that are able to start providing this enhanced support sooner to do so.

The FCA reiterates that consumers should keep up with payments on their mortgage if they can afford to do so and should only seek support where such support is absolutely necessary. The FCA has also provided more detail on which groups of consumers will and won’t be able to access payment deferrals:

• Those who have not yet had a payment deferral will be eligible for payment deferrals of six months in total.
• Those who currently have a payment deferral will be eligible to top up to six months in total.
• Those who have previously had payment deferrals of less than six months will be able to top up, as long as total deferrals don’t exceed six months. This includes those receiving tailored support and those who are behind on payments.
• Borrowers who have already had six months of payment deferrals will not be eligible for a further payment deferral. Firms will provide tailored support appropriate to their circumstances. This may include the option to defer further payments.

The FCA has confirmed that firms will continue to offer tailored support to borrowers.

Sheldon Mills, interim executive director of strategy and competition at the FCA said: “Today we have confirmed further support for borrowers struggling financially as a result of coronavirus.

“The announcement we have made today, ensures that the support offered through payment deferrals is as flexible and accessible as possible. This means borrowers will again be able to access payment deferrals up to a maximum of six months. However, if you are able to keep paying it will be in your best long-term interest to do so. Payment deferrals should only be taken when absolutely necessary.”

The FCA has also confirmed that no one should have their home repossessed without their agreement until after 31 January 2021.

Consumers will have until 31 March 2021 to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to 31 July 2021, provided these extensions cover consecutive payments, and subject to the maximum six months allowed. Borrowers who have not yet taken a deferral, and who think they need the full six months should apply in good time before their February 2021 payment is due.

Payment deferrals under these proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.

Tailored support may be reported on a borrower’s credit file, and lenders should inform borrowers where this will be the case. Any payment deferrals offered as tailored support could be recorded on a borrower’s credit file.

In October, the FCA issued separate guidance for borrowers with interest only or part-and-part mortgages whose capital repayment plans were affected by the crisis. This means that borrowers whose mortgages matured from 20 March 2020 can delay the repayment of the capital on their mortgage until 31 October 2021.

The FCA has today confirmed that as well as accessing payment deferrals before maturity, these borrowers can access payment deferrals after maturity without this affecting their ability to delay the capital repayment.

Gemma Harle, managing director of Quilter’s network advice business, said: “Following the news that the UK was going into another national lockdown a few weeks ago, the FCA were quick to let borrowers know that there was going to be help on the horizon in the form of further mortgage payment holidays and today they have set out what’s on offer.

“The FCA’s guidance, released this morning, gives borrowers the opportunity to continue to defer mortgage payments and reveals that borrowers can defer up to six months of payments in total. Sadly, anyone who has already had six months and needs more time will not be able to defer for a longer period.

“On top of this, the FCA has urged lenders to continue to provide tailored support to borrowers to get through this tough time. For many borrowers this winter period might have looked bleak to say the least and this news coupled with the positive news about a slew of effective vaccines for Covid-19 could represent a glimmer of light at the end of the tunnel.

“However, anyone thinking about taking advantage of a holiday should think very carefully about doing so. Mortgages are often the biggest single piece of debt anyone takes on in their life and it is important to make sure that any decision works both for the short and long term if possible. Extending the term of a loan means it will cost more over the lifetime of the product, so it is a decision that requires careful thought. For most people it will only be the right move if they face imminent financial difficulty and it is always worth if possible, discussing your options with a professional.”