British lenders grant mortgage deferrals of 1.2 million | Silver


UK lenders have granted mortgage repayment vacations to more than 1.2 million borrowers as part of relief measures for households affected by the Covid-19 epidemic.

This means that about one in nine households will see their mortgage payments and interest deferred for up to three months to cope with the loss of income during the crisis.

However, the numbers have prompted them to warn that some of these people may be turned down for future mortgages on the grounds that they are effectively announcing that they are in financial difficulty.

The figures cover approvals given in the three weeks starting March 17, when Rishi Sunak, the chancellor, announced that British banks were going to grant payment holidays.

Banking group UK Finance, which released the figures on Tuesday, said the average mortgage holder was saving £ 775 in suspended capital and interest each month, although payments are picked up by lenders.

Stephen Jones, Managing Director of UK Finance, said: “Mortgage lenders have worked tirelessly to help homeowners get through this difficult time. The industry has done everything in the past few weeks to grant an unprecedented number of customers a payment holiday, and we are ready to help further in the coming months. “

The government, the Financial Conduct Authority and the lenders have all made it clear that suspending payments will not affect an individual’s credit rating, and it remains so.

UK credit reference agencies such as Equifax and Experian hold the data that makes up a person’s credit rating, but these organizations do not decide whether a person can get credit – it is up to individual lenders, who are ultimately free to decide who they want to lend to. at.

Payment deferral can make a borrower less desirable to them, which means that in some cases, people’s future borrowing may be affected. Mortgage broker Private Finance said, “If you need new financing in the next six months – in terms of mortgage with a new lender, or going back to your existing lender regarding a new purchase – a repayment leave will make your request less likely to be accepted. “

Chris Sykes, a consultant to the firm, added that by requesting a payment deferral, “you are essentially announcing to your lender – and possibly other lenders who may see your bank statements in the future – that you are having financial difficulties. One lender even told us that if a borrower had requested a payment deferral on an existing loan, any new file would be automatically refused. Be warned that they will not be alone. “

Other official relief efforts have been slower to start. The government recently admitted that only 1.4% of companies requesting information on the £ 330bn business interruption loan system (CBILS) through UK banks have so far been successful.

Almost three weeks after Sunak launched CBILS to help small and medium-sized businesses with loans and other funding of up to £ 5 million, it turned out that only 4,200 of the 300,000 companies that had requested financial assistance ended up receiving rescue loans.

Paul Dales, the UK’s chief economist with the consulting firm Capital Economics, said it was essential that the government channeled money to businesses to avoid a worse economic downturn. “It seems that businesses hold the key, and if government and banks can keep businesses afloat, they have a chance of fighting. Otherwise, the costs of this crisis will persist longer. “


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