As the mess of Covid -19 has taken the world in its domination the mortgage bearers are now in great difficulty. In response, the lenders are offering 1.2 million mortgage payment holidays to their borrowers. The decision is right as well as bad news for the loan holders.
Concerns on a mortgage payment holiday
Two prime concerns rise with the payment holiday that can affect the borrowers.
- Future mortgage borrowing can become difficult for the borrower as the borrower declares that he is financially weak. This makes him less creditworthy in the eyes of the lenders.
- The borrowers are worried that this may affect their credit rating.
What is the justification for the concerns?
Well, both the situations do exist, but you should know what the reality is –
- If you talk about the issue of difficulty in borrowing mortgage in future, yes this issue exists. The fund seekers with the payment holiday in the past payment history may face the problem in availing funds.
- If it is about the fear of degrading in credit rating that is not true. It was made clear by the Financial Conduct Authority (FCA) and the lenders.
Mortgage broker Private Finance said – A repayment holiday makes your application prone to rejection for any kind of mortgage. Those who have availed it have to face such consequences. Shine Mortgages too agrees on this fact.
The outcome picture
The whole mortgage market and the borrowers also, are going through a difficult time of contradiction. All know that they did not ask the mortgage payment holiday granted to the borrowers.
The situation leaves people with several questions, and they are –
As the payment holiday was not the actual demand of the borrowers. It was a result of the corona lockdown situation, can people avail payment holiday again?
Should FCA do something about the situation? This condition was unpredictable, but the borrowers have to face the consequences. They have lost the next chance to get a mortgage.
What should be the compensation for the lenders against the loss they have to bear?