Borrowers who took a loan repayment “vacation” with the assurance that it wouldn’t affect their credit score are having trouble getting mortgages, a Sunday Mail survey found.
The banks rejected customers who – after the Covid-19 foreclosure began – chose to take breaks to pay off home loans, credit cards, and auto finance loans. That, although the government has said it, there would be no repercussions.
More than three million people – many of whom are on time off – have used paid holidays after the economic shock of the coronavirus. Sources said borrowers who have done so have since received initial confirmation of their creditworthiness when applying for new mortgages, but have been turned down after more detailed analysis.
Banks have rejected customers who – after the Covid-19 lockdown began – chose to take breaks to pay off home loans, credit cards, and auto finance loans (file image)
The situation was confirmed by several sources, including one who said the banks had asked whether candidates had taken payment holidays or were on leave, and viewed it “in a negative light.”
They could now be seen as riskier borrowers than someone who continued to pay their mortgage despite everything, ”said another.
Another mortgage source said it was “reasonable” for banks to take an unbiased view rather than lend to someone whose financial situation was now uncertain.
Activists have called for an official investigation. Siobhain McDonagh MP, who sits on the Special Treasury Committee, is considering writing to Chancellor Rishi Sunak. She said, “When the banks were in trouble, the taxpayer was there for them. Now the taxpayer is in trouble – it’s time for the banks to step up and deliver on their promises.
James Daley, consumer champion at Fairer Finance, said the banks “are blatantly ignoring” the regulator, the Financial Conduct Authority. He added: “The regulator has issued a note telling companies that they should provide this forbearance and that it should not affect people’s credit rating.
“Lenders should be totally blind to these payment breaks – and shouldn’t have them marked on people’s credit reports. “
Borrowers have been reassured by credit agencies, including Experian, and the government that payment holidays would not affect their credit history.
Business Secretary Alok Sharma said in March, “I think the advice that has been issued is that any changes must be properly documented and this should not affect your credit score. “
Experian said at the time that the credit reporting agencies “would ensure that the agreement is reflected in your credit reports so that your score is not affected by any payment deferral you accept.”
A spokesperson for the Treasury said, “The watchdog has made it clear that payment suspensions should not have a long-term impact on people’s credit rating – and that when more help is needed, lenders should be clear about the possible implications. “