Lenders should be clear that mortgage holidays are available for those in arrears, MPs say
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The websites of banks and building societies should make it clear that three-month mortgage holidays are available to everyone, including those in arrears, MPs said.
The ability to request payment holiday should also be included in letters and emails sent by mortgage lenders and administrators.
This reflects guidelines set out by UK Finance and the government which state that mortgage payment holidays can still be offered to people behind on their mortgages. Many lenders have already agreed to offer relief to these borrowers.
Kevin Hollinrake, Co-Chair of the All-Party Parliamentary Group (APPG) on Fair Business Banking and Seema Malholtra, chairman of the APP for Mortgage Prisoners, launched the warning in a letter to the Financial Conduct Authority (FCA), the Treasury and the Bank of England.
Mortgage prisoners
MPs also said the FCA’s prediction that 14,000 mortgage prisoners would benefit from the affordability rating changes could be affected by the massive withdrawal of high-value mortgages seen in recent days.
It also proposed to cap standard variable rates on the basis of a maximum margin, similar to than in the energy sector, to prevent interest from accruing at high rates.
Regulatory scope
It has been suggested that the powers of the FCA be extended to ensure that commercial lenders receive funds and agree to the same payment holiday terms as banks.
The letter says the regulator needs to have more direct oversight of unregulated funds to ensure fair treatment of customers at all levels.
Some alternative lenders have had to go to the British Business Bank program to access funds in order to continue lending, but these will not be received for weeks. It has been proposed that the Treasury and the Bank of England set up a direct program for these lenders so that they can access finance within days.
They said if no action is taken in the next three to 18 months, the problems seen in the 2008 crisis would be repeated.
“Slow to act”
MPs said unregulated lenders were “slow to act” and in some cases refused to cooperate with government guidelines because they did not fall under the same guidelines.
Some unregulated lenders continue to threaten repossession action against government guidelines, while others do not allow mortgage payment holidays if payment is due within seven days, MPs said. Instead, borrowers are told that payment holidays will begin the following month.
In addition, commercial mortgage holidays are only offered on an item of principal rather than interest, the letter says, meaning borrowers always do. the majority of refunds. MPs said if this is not resolved it could lead to financial hardship.
The Bank of England and the FCA met remotely with UK banks on March 30 to discuss lending money to retail clients such as mortgage borrowers and managing those who may face lost income.
Speaking to Sunday opening hoursFCA Interim CEO Christopher Woolard said of the meeting: “It’s about saying, ‘How do you strike the right balance between helping people in the short term and doing the right thing for them over the next three, six months, or even more? “”
Mortgage solutions has contacted the Bank of England and the FCA for comment.
Shekina is the Business Writer at Mortgage Solutions. She has over four years of experience in the B2B publishing market, with previous industries such as accounting, pets, funerals, hospitality, retail, and jewelry. She currently reports on mortgage market news and liaises with financial clients to produce sponsored content. Follow her on Twitter at @ShekinaMS
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