Martin Lewis has been advising people on payment holiday rules for mortgages and other forms of credit since they were launched earlier on in the year. The Money Saving Expert has broken down how they can be useful for struggling consumers in the past but they should only be used if absolutely necessary given their long-term ramifications.
Despite this caution, Martin has recently urged savers to look into payment holidays even if they do not need one at the moment.
This is due to the fact that final deadlines for payment freezes are quickly approaching, as Martin explained: “So, COVID payment holidays are ending.
“These are the big regulator enforced payment holidays that were put in place on mortgages overdraft, credit cards, personal loans, insurance, car finance, buy now pay later, rent to own and pawn broking.
“And they end on the 31st of October.”
“It might be, they’ll just reduce what you can pay or they’ll shift you to a different product, they don’t have to give you a payment holiday, and that will go on your credit file, and is likely to have a much more substantial impact on your future ability to gain credit.
“So if you think you are going to be struggling over the next few months, you would be better to take a payment holiday. Now, if that would help.”
The changes Martin covered were laid out by the FCA throughout September and into early October.
In the announcements, the regulator made it clear it expected banks and lenders to tailor their ongoing support on an individualistic basis, as opposed to adopting a “one size fits all” approach.
As Christopher Woolard, the Interim Chief Executive for the FCA at the time, commented: “Consumers in these situations will benefit from firms providing them with tailored support.
“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”
In the same announcement, the FCA outlined how the new arrangements will affect credit files: “Where borrowers have taken, or are taking, payment deferrals under our existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes.
“This also applies to borrowers newly affected by coronavirus who receive support from their lender after October 31.
“This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending.
“Firms are required to be clear about the credit file implications of any forms of support offered to borrowers “Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.”
Martin concluded his advice by urging affected consumers to look into payment holidays now as financial firms are likely to be faced with delays as the new rules come into effect.
Published at Fri, 23 Oct 2020 10:05:42 +0000