Payment holidays on mortgages and loans, the future impact?

[Gio G]

Was talking to a business associate the other day who does allot of classic car finance and he mentioned that many of his wealthy clients were taking the mortgage holidays offered by the banks. It appears that due to a huge influx of applications, they just opened it up to all and was not means tested. The same goes for loans or car payments.

He was suggesting that it would have an impact on their ability to get credit in the future..but he was also astonished that people took these holidays, while not being in financial difficulty, furloughed etc..

I do wonder what the real impact of this will be in the future for those generally in hardship or those wanting to save a few quid in the short term?

G

[greygoose]

Gio G said:

Was talking to a business associate the other day who does allot of classic car finance and he mentioned that many of his wealthy clients were taking the mortgage holidays offered by the banks. It appears that due to a huge influx of applications, they just opened it up to all and was not means tested. The same goes for loans or car payments.

He was suggesting that it would have an impact on their ability to get credit in the future..but he was also astonished that people took these holidays, while not being in financial difficulty, furloughed etc..

I do wonder what the real impact of this will be in the future for those generally in hardship or those wanting to save a few quid in the short term?

G

I don't understand why anyone would take a mortgage holiday when they are not suffering any difficulty, as the banks are going to want their money back at some point even if interest rates are very low at the moment. If I was the bank it would make me suspicious that the person was not quite as well off as they claimed to be.

[Sarnie]

I posted on here numerous times, not to take the payment holiday if you didn't actually need to.

I've seen numerous incidents recently where clients have now applied for further lending from their lender, who has said no because they took the payment holiday.....along the lines of "You recently told us that you needed three months off your mortgage payments because you couldn't afford them, but now you want to increase your lending?"

Also, Natwest won't currently lend to any new applicants where there has been any holiday payments on any credit, in recent months......

[towser44]

Nationwide went as far as saying a few weeks ago that taking a payment holiday should be recorded on someone's credit file.

[Sarnie]

Sarnie said:

I posted on here numerous times, not to take the payment holiday if you didn't actually need to.

I've seen numerous incidents recently where clients have now applied for further lending from their lender, who has said no because they took the payment holiday.....along the lines of "You recently told us that you needed three months off your mortgage payments because you couldn't afford them, but now you want to increase your lending?"

Also, Natwest won't currently lend to any new applicants where there has been any holiday payments on any credit, in recent months......

To follow on from this, I've just had this from HSBC;

"If they’re able to afford any payments during their payment holiday, even if it’s less
than their current monthly payment, we encourage them to do so as this will
reduce the impact on their future monthly payments and total cost of borrowing at
the end of the payment holiday.

Although taking a payment holiday won’t negatively impact their credit file, please
make them aware that lenders may take into account other information when
making future lending decisions."

[cossy400]

Sarnie said:

I posted on here numerous times, not to take the payment holiday if you didn't actually need to.

I've seen numerous incidents recently where clients have now applied for further lending from their lender, who has said no because they took the payment holiday.....along the lines of "You recently told us that you needed three months off your mortgage payments because you couldn't afford them, but now you want to increase your lending?"

Also, Natwest won't currently lend to any new applicants where there has been any holiday payments on any credit, in recent months......

I know this is a how longs a piece of string Sarnie, but Step daughter and Husband jumped the gun with this holiday business.

Basically shes on mat leave and he thought he was going furloughed and lose a big wack of his wages in the process, but hes been paid 100% of his salary all the way through and "maybe " this month theres talks of dropping it to but not sure to what.

So they ve banged the mortgage money in another account, is it best to leave this till renewal time and pay it off it with maybe a little more on top or just over pay for however long it takes to get rid of it?

Renewal is in either 2 or 3 years.

[Sarnie]

cossy400 said:

I know this is a how longs a piece of string Sarnie, but Step daughter and Husband jumped the gun with this holiday business.

Basically shes on mat leave and he thought he was going furloughed and lose a big wack of his wages in the process, but hes been paid 100% of his salary all the way through and "maybe " this month theres talks of dropping it to but not sure to what.

So they ve banged the mortgage money in another account, is it best to leave this till renewal time and pay it off it with maybe a little more on top or just over pay for however long it takes to get rid of it?

Renewal is in either 2 or 3 years.

Difficult to say............keep hold of the money, see how his job pans out for the next few months and if it continues, pay the money off the balance ASAP........

[cossy400]

Sarnie said:

cossy400 said:

I know this is a how longs a piece of string Sarnie, but Step daughter and Husband jumped the gun with this holiday business.

Basically shes on mat leave and he thought he was going furloughed and lose a big wack of his wages in the process, but hes been paid 100% of his salary all the way through and "maybe " this month theres talks of dropping it to but not sure to what.

So they ve banged the mortgage money in another account, is it best to leave this till renewal time and pay it off it with maybe a little more on top or just over pay for however long it takes to get rid of it?

Renewal is in either 2 or 3 years.

Difficult to say............keep hold of the money, see how his job pans out for the next few months and if it continues, pay the money off the balance ASAP........

Cheers for that,

[anonymous-user]

Sarnie said:

I've seen numerous incidents recently where clients have now applied for further lending from their lender, who has said no because they took the payment holiday.....along the lines of "You recently told us that you needed three months off your mortgage payments because you couldn't afford them, but now you want to increase your lending?"

This has really surprised me (maybe it shouldn't have?) as a mortgage underwriter. The number of 'loyal' movers who have asked for a three month payment holiday only to apply for increased lending on a more expensive house a few days/weeks later. I've no idea why people would think we'd have no issue with that. My big decline button is getting a lot of use

[Sarnie]

Sten. said:

This has really surprised me (maybe it shouldn't have?) as a mortgage underwriter. The number of 'loyal' movers who have asked for a three month payment holiday only to apply for increased lending on a more expensive house a few days/weeks later. I've no idea why people would think we'd have no issue with that. My big decline button is getting a lot of use

Exactly my point, thanks for the post from the other side of the desk!

[m3jappa]

Im a bit annoyed with myself as i took one.

At the start of all this my phone totally stopped ringing, a couple of jobs cancelled. No money coming in, just the money i had.

I assumed (because I'm a glass half empty type) that this was now a catastrophe. I organised my money to work out exactly how long i could last and felt that taking the holiday would give me more time to get back on my feet.

Anyway, what happened was i did have 6 weeks off work, i went back, phone gone mad, cancelled jobs back on. A boom in my game at the minute for sure!

Frustrating as i may plan to move in the next 2-3 years and i didn't actually need it really. Whats also annoying is it was sold as it doesn't effect your credit rating as the circumstances are so unusual.

[Sarnie]

m3jappa said:

Im a bit annoyed with myself as i took one.

At the start of all this my phone totally stopped ringing, a couple of jobs cancelled. No money coming in, just the money i had.

I assumed (because I'm a glass half empty type) that this was now a catastrophe. I organised my money to work out exactly how long i could last and felt that taking the holiday would give me more time to get back on my feet.

Anyway, what happened was i did have 6 weeks off work, i went back, phone gone mad, cancelled jobs back on. A boom in my game at the minute for sure!

Frustrating as i may plan to move in the next 2-3 years and i didn't actually need it really. Whats also annoying is it was sold as it doesn't effect your credit rating as the circumstances are so unusual.

You will probably be ok in 2-3 years time.......it's just in the current environment we are in.......and people going from holiday payment in May, asking for more money for a new house/car/shiny thing in June............

[towser44]

Sarnie said:

m3jappa said:

Im a bit annoyed with myself as i took one.

At the start of all this my phone totally stopped ringing, a couple of jobs cancelled. No money coming in, just the money i had.

I assumed (because I'm a glass half empty type) that this was now a catastrophe. I organised my money to work out exactly how long i could last and felt that taking the holiday would give me more time to get back on my feet.

Anyway, what happened was i did have 6 weeks off work, i went back, phone gone mad, cancelled jobs back on. A boom in my game at the minute for sure!

Frustrating as i may plan to move in the next 2-3 years and i didn't actually need it really. Whats also annoying is it was sold as it doesn't effect your credit rating as the circumstances are so unusual.

You will probably be ok in 2-3 years time.......it's just in the current environment we are in.......and people going from holiday payment in May, asking for more money for a new house/car/shiny thing in June............

It's only a problem if you are applying to your existing lender though, is it not? I read that Nationwide's view was that it should go on someone's credit report, but it doesn't actually do so? So if your with Nationwide now and apply for a loan, mortgage, credit at another lender how would they know you took a holiday?

[Sarnie]

towser44 said:

It's only a problem if you are applying to your existing lender though, is it not? I read that Nationwide's view was that it should go on someone's credit report, but it doesn't actually do so? So if your with Nationwide now and apply for a loan, mortgage, credit at another lender how would they know you took a holiday?

No, Natwest for example are declining new client applications where any payment holidays have been taken.

Your credit accounts still show up on your credit file......they request bank statements and cross reference your direct debits with what your credit says you should have been paying each month..........they will ask you why they don't match......."took a holiday payment"........decline.

[So]

Sarnie said:

towser44 said:

It's only a problem if you are applying to your existing lender though, is it not? I read that Nationwide's view was that it should go on someone's credit report, but it doesn't actually do so? So if your with Nationwide now and apply for a loan, mortgage, credit at another lender how would they know you took a holiday?

No, Natwest for example are declining new client applications where any payment holidays have been taken.

Your credit accounts still show up on your credit file......they request bank statements and cross reference your direct debits with what your credit says you should have been paying each month..........they will ask you why they don't match......."took a holiday payment"........decline.

What if the mortgage product allow them, which some do?

[Sarnie]

So said:

What if the mortgage product allow them, which some do?

Thats different, we are talking about people taking government enforced 3 months holiday breaks due to CV-19......

[So]

Sarnie said:

So said:

What if the mortgage product allow them, which some do?

Thats different, we are talking about people taking government enforced 3 months holiday breaks due to CV-19......

I think banks declining on that basis is rather dubious.

Some people didn't know on 23 March what their income would be 23 April and some banks (Lloyds as an example) were actively offering payment holidays, with an assurance that borrowers would be unaffected by accepting. Many people have been relieved to find that, so far anyway, the wheels have not yet fallen off.

An extension of that, BTL. The government said that no landlord would be affected by the breathing space offered to tenants. BTL lenders have allowed payment holidays. If landlords are no longer able to borrow as a result of having accepted them I can see the Ombudsman's desk awash with referrals.

[Gio G]

The way I read this is that the banks suggested it would not affect your credit file, however failed to mention that it would not be looked upon favourably under their lending criteria. I suspect a good IFA will say that their client took it out as a precaution only, did not know whether they would be out of work, when in fact they didn't need it..

Given the real easy way in which they provided this holiday, you can see why a fair few took it.. Sarnie - what are you seeing currently in the market? any fall in valuation prices? or is that a little too early to tell?

G

[Sarnie]

So said:

with an assurance that borrowers would be unaffected by accepting.

Incorrect.

The only assurance was that it would not impact your credit file, which is true, it hasn't impacted people's credit files. There was no assurance of how lenders would view you having taken a mortgage holiday when you wanted to borrow money at a later date.

Would you lend someone £200k, who in March told you that they may not be able to pay the payment at the end of the very next month? Thats how lenders think.

BTL's are not Regulated mortgages, so they fall under different assessment and Regulation.

[Sarnie]

Gio G said:

The way I read this is that the banks suggested it would not affect your credit file, however failed to mention that it would not be looked upon favourably under their lending criteria. I suspect a good IFA will say that their client took it out as a precaution only, did not know whether they would be out of work, when in fact they didn't need it..

G

What you need to remember is that the Government forced lenders to provide the three months holiday breaks, they didn't want to, and wouldn't have done so voluntarily. As far as they are concerned, you've signed on the dotted line to pay them each month come rain or Coronavirus, it's not their concern if you have no savings or didn't take out the relevant Income Protection or Redundancy cover. In my opinion, a significant amount of people took the payment holiday before they knew whether they were going to be able to pay the mortgage next month or not. There was plenty of people on here posting that they were gonna spend the money on their cars or doing their gardens up etc. This creates a hole in the banks income......so I don't think it's particularly surprising that there is a little push back against the consumer when that same person comes back in June and wants a bigger mortgage to buy a bigger house when they couldn't afford the one they have a couple of months ago......

An IFA can't override lending criteria, if that's what the lenders stance is, that's it.

A good IFA will find you a lender who won't be so restrictive in their assessment.