Many landlords struggling with their finances are worried that if they take a mortgage holiday, their credit score will worsen.
UK Finance, the trade body for home and buy to let mortgage lenders, says the brakes are on 1.6 million loans due to the coronavirus pandemic.
A mortgage holiday does not wipe out a monthly mortgage repayment. Landlords taking the holiday will have the full amount they miss added to their mortgage account. Lenders will recalculate the balance over the remaining mortgage term and take the new, higher payment once the holiday ends.
Usually, missing a mortgage repayment damages a credit score.
But in the case of a mortgage holiday, the three main credit agencies – Experian, Equifax, and TransUnion – have pledged not to penalise mortgage payers by including the defaulted payment in their credit file.
The same measure applies to loans, store cards, credit cards and covers any agreed payment holiday, reduced payments, or increased credit limits.
The key is speaking to the lender before withholding a payment or the risk is the missed amount may not treat the transaction under payment holiday rules.
Some lenders are dealing with appeals for payment holidays through call centres, while others are accepting online declarations.
Christopher Woolard of the Financial Conduct Authority, the regulator for the sector, said: “The changes provide support for consumers with credit cards, loans and overdrafts, facing temporary financial difficulties because of the pandemic.
“Customers should think carefully before making use of these measures and only do so if they need immediate help.
“Where they can still afford to make payments, they should continue to do so.”
The government has also said that if landlords take a buy to let mortgage holiday, they should pass the benefit to tenants as well.
