Are we being told the truth about payment holidays?

On a personal level, I joined Twitter in 2008 and I think that this makes me a reasonably early adopter. although I’m sure that my outlook and output has changed over the years. Twitter has evolved to become an important platform for me to offer a variety of updates to our clients and partners from both a personal and business-perspective. Although I have to say that this is now probably 95% business-related, the other 5% being centred around Liverpool FC. However, this percentage may have temporarily switched when taking into account the recent Premiership title win!

Now I certainly don’t profess to be a social media expert, and this article is not going to be a social media guide for intermediaries, but the centre point of this piece does stem from a recent tweet I made:

“I said from the outset, mortgage payment holidays would be treated as #adverse.... A lender writes - "the credit search now shows Mr has current or recent late payments on 3 x mortgage items. The applications have been declined. He took a #mortgagepaymentholiday #justthestart”

This generated much discussion within the intermediary community, which is – generally speaking – a positive thing when people enter into it with the right intentions, especially around important topics such as these.

This tweet also reminded me of something I wrote on our company blog back in March when the concept of mortgage payment holidays was first introduced. And this is something I just revisited which I’d also like to share.

It said: If you don’t need to, don’t take the payment holiday. This may sound strange, but behind the scenes, and despite saying it won’t affect your credit score, it will possibly affect your ongoing ability to borrow. No one knows exactly how these holidays will be accounted for when you go to remortgage or buy another property.

Lenders want to see that you have consistently paid your last twelve-monthly mortgage payments. If you take the payment holiday, you will have only paid nine. With the onslaught of technology making decisions, a computer may not be able to decipher that you’ve had an approved payment holiday for three months. It will only see that the mortgage has not been paid.

In the interim, this is may seem small beer in the grand scheme of things. The reality is that, for onward future finances, it could be huge. We know this as in more normal climates, you can take one mortgage payment holiday and it is usually registered as a ‘U’ on your credit reports and we can sometimes have trouble getting these through lenders' current systems.

Now I am certainly no Nostradamus but, from what we are experiencing just over three months down the line, there are ongoing concerns about how mortgage payment holidays will affect some homeowners moving forward.

The whole issue may be different based on residential and buy-to-let mortgages, but either way, it will be lender dependent. Some will have fantastic systems that recognise the payment holiday and proceed as normal. Others, as per my example, will just see the payment holiday as missed/late payments and decline to proceed. The potential fall-out from this is an issue which will continue to rumble. And the more we can get the intermediary market talking and sharing their experiences in a positive manner across many forums and platforms has to be a good thing.

So, why not follow me @DaleJannels and join the discussion.