Securing a remortgage or product transfer after a payment holiday

The end of March deadline was retained which means that we are now past the period when a payment holiday can be applied for; instead, as the FCA points out, customers will have to work on an individual basis with their lenders/providers and that ‘tailored support’ will be offered rather than the blanket agreement that has been in place since the start of first lockdown last year.

Of course, after the initial burst of payment holiday take-up, we had already seen a steep decline in the numbers opting for this, particularly when it comes to mortgages, however it will be interesting to see just how many applications for a holiday were made in the last few weeks of March.

One suspects that some borrowers may have opted for a hedging their bets approach, particularly if their employment situation was deemed precarious, and in light of what may (or may not) happen to their jobs after, for example, furlough has ended.

What is certain is that the mortgage payment holiday take-up over the last 12 months has been significant and, even with the vast majority of borrowers having come off those plans and are now paying their missed payments back, there is some unease about what this will truly mean for their credit reports and their ability to secure mortgages in the future.

Of course, there was a significant media furore around payment holidays showing up on credit reports and impacting on future borrowing, and the regulator and lender trade bodies were quick to suggest this wouldn’t be the case.

However, what has come to pass is that lenders have undoubtedly been taking those missed payments into account when looking at a borrower’s credit-worthiness with many wanting to see that return to normality before they are willing to lend.

Consumers are not stupid and can see how this might impact them. A recent survey of UK homeowners by Haysto revealed that close to three-quarters were worried about a mortgage payment holiday impacting their credit score, even when the system was ‘designed’ specifically not to do this.

Of course, part of the major issue for advisers supporting these existing borrowers in remortgaging or securing product transfers, is in getting to the bottom of what might well have gone on during the last 12 months. Those payment holidays shouldn’t be showing up on credit files, but as mentioned, lenders want to know exactly when they were taken and what the circumstances are now.

And, of course, advisers will need to be in full possession of all financial facts before they’re able to move forward and eventually deliver their recommendation to the client. Without those full facts, at best the process will be delayed, and at worst there could be fewer product options for the client – indeed, it may well be that borrowers who were firmly mainstream pre-pandemic will now have to look at specialist options for the short-term.

All in all, without that full picture through credit report and open banking access, the job of an adviser is going to be tougher. The positive here is that, with access to a product like Credit Access, all that information can be in your hands from the very earliest part of your client interaction and, from there, you’ll be able to provide the support and advice that your client needs and highlight all their options.

This will be greatly appreciated, especially from those clients who have taken holidays and – as the survey suggests – are much more likely to be worried about what this means for their mortgage access in the future.

Advisers have the opportunity to quickly take the stresses and strains away for these clients and the further good news is that such credit/open banking products are readily available and could make all the difference in quickly getting the result you and the client wants.