FCA urges lenders to support mortgage customers hit by Covid-19

The Financial Conduct Authority has banned lenders from repossessing homes until February 2021 and extended mortgage payment holidays, it was confirmed on Tuesday.

The regulator said borrowers who have not yet deferred repayments would be eligible for payment deferrals of up to six months, while those who already have a deferral in place will be eligible to top it up to six months in total.

Borrowers who have had the full six months of holiday payments will not be eligible for further deferrals, but lenders should still provide tailored support "where appropriate".

Homeowners, meanwhile, cannot have their homes repossessed without their permission until after 31 January 2021.

Payment holidays, first announced earlier this year, are intended to help customers who are struggling financially because of the Covid-19 pandemic. They must be agreed with a lender, however, with the deferred amounts added to the length of the mortgage.

Sheldon Mills, the FCA’s interim executive director of strategy and competition, said the guidance ensured the support offered via payment deferrals was "as flexible and accessible as possible".

However, he cautioned: "If you are able to keep paying, it will be in your best long-term interest to do so. Payment deferral should only be taken when absolutely necessary."

Payment holidays do not appear on a customer’s credit file, but future lenders have the right to ask if a holiday has ever been taken.

The rules come into force from 20 November. Customers have until 31 March to apply to their lender for an initial or further payment deferral.