Will my mortgage holiday affect my ability to borrow?

Has the holiday been detrimental?

Many borrowers will likely be asking for further extensions to the scheme, as the need to defer payments for many hasn’t changed that much in the last few months. The mortgage holiday was introduced in March, with the intention that it wouldn't affect the credit rating of those that chose to defer payments. However, it may be that the holiday could have unintended consequences for those that needed to immediately cut their outgoings. Some borrowers have now found they are being declined when applying for loans. An article from the BBC, revealed that the managing director of Keys Mortgages, Lisa Orme, has been warning borrowers not to take them unless they have no other option. It looks as though many people have used the scheme to pay off holidays, or credit cards etc, but this may come back to bite them.

Lenders might be wary

According to the Financial Conduct Authority (FCA), the mortgage holidays shouldn’t affect people’s credit records. However, they are warning that it could affect future lending decisions, as lenders will look at thousands of pieces of data when you apply to borrow money. Lenders will look at all your payment history, and once they see a 3 month gap around this period, they’re going to know that it’s from a mortgage holiday. Of course if they then see a 6 month gap, they will also know that you’ve had to extend this, which could be an indicator of further financial issues. The FCA updated its guidance surrounding this in May, stating that: "Lenders may use sources other than credit files, such as bank account information, to take account of other factors in their lending decisions. These factors could include changes to income and expenditure." A spokesperson for the Treasury also said: "The Financial Conduct Authority has been clear that payment holidays should not have a long-term impact on people's credit rating." Be aware that as a mortgage holder, you’ll have until 31st October to apply for a three-month mortgage holiday if your finances have been affected by the pandemic. The FCA has also banned repossessions until the end of October.

Looking to remortgage?

If you are in a position to remortgage then we can help. We’re leading mortgage brokers in Manchester, and will provide a personalised remortgage solution, designed specifically to fit your needs and circumstances. These are extremely difficult times for people, especially financially, therefore it may take longer than usual to get things in motion. However, we’re here to help and can assist you in getting everything in place to submit applications once things get moving again. Contact us today and our team will be more than happy to help you.