The Financial Conduct Authority (FCA) has published guidance around the support mortgage borrowers should receive if they continue to face payment difficulties due to coronavirus, but has confirmed that these supports will be able to affect credit scores.
The additional guidance outlines that consumers who have benefitted from payment deferrals who still face financial difficulties, and those whose financial situation may be newly affected, should continue to receive short and longer-term support from firms.
This support could include extending the repayment term or restructuring of the mortgage.
Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track.
This next wave of supports – whether for borrowers previously receiving support or doing so for the first time – will, unlike the first, be able to directly affect the mortgage borrower’s credit score, in accordance with normal reporting processes.
This change aims to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending in the future.
Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.
This additional guidance will come into force on 16 September 2020.
The current guidance, published in June, will continue to provide support for those impacted by coronavirus until 31 October 2020 – with consumers able to take a first or second three-month payment deferral until this date.
The new guidance ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after 31 October.
Under the new guidance, firms must prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties.
It also reinforces the need to deliver outcomes that are right for individual borrowers rather than adopting a one-size-fits-all approach.
The FCA will monitor firms to ensure borrowers are treated fairly having regard to their individual circumstances.
Firms will also signpost borrowers to the support they need in managing their finances, including through self-help and money guidance, or refer borrowers to organisations that can provide free debt advice if this meets their needs and circumstances.
Christopher Woolard, interim chief executive at the FCA, said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time.
“Consumers in these situations will benefit from firms providing them with tailored support.
“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”
Fiona Hoyle, head of consumer and mortgage finance at the Finance and Leasing Association (FLA), said: “With most parts of the economy now open for business and more consumers able to resume their usual mortgage payments, the flexibility set out for lenders today is welcome indeed.
“There will certainly be people who will require ongoing support, but lenders can now prioritise these customers and offer solutions specific to their circumstances.”
Eric Leenders, managing director of personal finance at UK Finance, said: “The banking and finance industry is committed to providing ongoing support to those facing financial difficulty as part of our clear plan to get the country through this crisis.
“Lenders understand that many households will continue to see their finances squeezed as the pandemic continues and will be offering a range of support for those who need it.
“It is essential that customers speak with their lender to discuss the best solution for them.
“Firms will be communicating with customers whose mortgage payment deferral is coming to an end to discuss the options available.
“Those who can afford to resume payments should do so, as it will always be in their best interests in the long run.”