Coronavirus UK: Loans on 1.6million homes are now subject to payment holidays

Homeowners across Britain have taken payment holidays on one in seven mortgages during the coronavirus pandemic – totalling an estimated £3.6billion.

Loans on 1.6million homes are now subject to the payment break, which amounts to £755 per month of suspended payments for the average mortgage-holder.

The figures revealed by trade association UK Finance as of April 24 show how people are using the measure intended to help those in financial difficulties amid the crisis.

It comes as a row of abandoned estate agent boards were pictured in Wandsworth, South London, today after being taken down with much of the market now on hold.

Abandoned estate agent boards near Wandsworth Common in South London pictured today

The estate agent boards in Wandsworth have been taken down during the coronavirus crisis

The payment breaks are in place for up to three months, meaning people are having an average of £2,265 suspended – totalling £3,624,000,000 across 1.6million homes.

UK Finance also said firms are waiving a rule in order to help customers move over to a new mortgage deal with their lender.

UK Finance chief executive Stephen Jones (pictured) said the industry had ‘acted quickly to support home-owners through this crisis’

Normally, customers who are coming to the end of a fixed-term deal would not qualify for a product transfer if they are currently on a mortgage payment holiday.

But UK Finance said that, given the current exceptional circumstances, lenders are waiving this rule to help borrowers affected by Covid-19.

Product transfers are for like-for-like mortgages and tend not to require borrowers to go through a new affordability assessment, meaning existing borrowers who have been furloughed will also be eligible.

Robin Fieth, chief executive of the Building Societies Association (BSA), said: ‘Lenders are working hard to help in a range of ways and it is right that this now includes the ability for those on a three-month payment holiday to be able to switch on to a new product with their existing lender at the end of a fixed-term product should the two events coincide.’

A bus travels past the abandoned estate agent boards near Wandsworth Common today

Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), said: ‘This agreement builds on the commitment made by lenders in July 2018 to contact customers who are coming to the end of a mortgage deal and discuss what alternative options might be available.

How banks could make £800million from the avalanche of mortgage holidays

Banks are set to make more than £600 million in extra interest paid by cash-strapped homeowners taking mortgage holidays.

Campaigners say the vast profit lenders will make from the crisis is ‘disgraceful’ and are demanding they scrap additional interest charges.

The breaks are seen as a lifeline for borrowers facing financial ruin due to the coronavirus crisis and 1.6million have been approved, according to UK Finance.

But most homeowners will end up facing heftier interest payments as a result — around £500 on a typical mortgage.

That is despite banks being able to borrow at record low rates and the billions of taxpayer cash that was used to bail them out in the last financial crisis.

Baroness Altmann, former pensions minister, said: ‘It’s an outrage that people are being led to believe that banks are somehow being kind to them when actually what they’re doing is making more money from them. What we need is an interest holiday that doesn’t rack up extra costs in the long run and actually gives something back.’

Homeowners can ask their bank to freeze their mortgage payments for three months, but face paying out more overall because interest accrues.

When the break ends, borrowers can choose to pay back the interest or add it to their loan balance. The latter option will cause monthly repayments to rise for the rest of the term.

On an average £132,128 mortgage at 2.37 per cent over 17 years, the total repayment is £160,656. A three-month mortgage holiday will push the total up to £161,164, an increase of £508, says AJ Bell.

The majority of approved holidays are thought to be for the full three months.

The Financial Conduct Authority has encouraged banks to be flexible when offering mortgage holidays and has said lenders can reduce or waive extra interest charges for those in need.

‘It offers additional – and no doubt welcome – reassurance that customers will not be penalised if they have sought an approved payment holiday during this difficult period.’

Three-month mortgage payment holidays may be offered to borrowers who are up to date with their payments.

But interest will continue to accrue and borrowers will still owe the money when a payment holiday has been granted – so the overall mortgage debt will continue to build up and it will still need to be paid off.

Mortgage borrowers may want to consider making part-payments to reduce their debt even if they cannot currently afford to pay the full amount.

UK Finance said a payment holiday may not be the right choice for everyone, and customers should only apply if they need one.

People making applications for this support will need to self-certify that their income has been either directly or indirectly hit by the coronavirus pandemic.

It has also previously said that firms will make every effort to ensure that payment holidays do not negatively affect people’s credit ratings.

More than a third of all payment holiday approvals so far were in the early days of the lockdown, between March 25 and April 1.

UK Finance chief executive Stephen Jones said: ‘The industry has acted quickly to support home-owners through this crisis and has taken decisive steps to ensure that eligible customers on payment holidays due to Covid-19 can opt for the security of fixing their monthly mortgage payments going forward.

‘There is a range of support available to mortgage-holders concerned about their finances.

‘We would encourage any home-owners impacted by coronavirus to visit their lender’s website in the first instance to find out more information and how to apply.’

Many lenders are offering customers the option to apply for a mortgage payment holiday by filling in a form on their website, as phone lines remain extremely busy.

Lenders are also urging mortgage-holders not to cancel their direct debits before a payment holiday has been agreed, as this will be counted as a missed payment and could affect their credit file.

Demand for homes collapsed in March and, even though it has picked up a little over the past couple of weeks, it still remains 60 per cent below the levels at the beginning of March

Demand is defined by Zoopla as potential buyers viewing property listings and following up with further enquiries. Cardiff saw one of the biggest drops in demand last month, of about 80 per cent, while Newcastle registered a lower drop in demand, which is down almost per cent

It comes after Zoopla estimated around 373,000 property transactions, with a total value of £82 billion, are now on hold due to coronavirus lockdown measures.

Santander reveals 240,000 of its customers are on mortgage and credit card holidays – with savings rates and 123 account due to be cut

Nearly 240,000 Santander customers have been given three-month payment holidays on their credit cards, loans and mortgages, the bank said this morning.

The UK arm of the Spanish bank, Britain’s fifth-largest high street lender, revealed its pre-tax profit fell 58 per cent to £114million in the first three months of 2020, blaming competition in the mortgage market and the coronavirus crisis.

Santander currently has seven cuts to variable rate savings accounts lined up for next month, while the in-credit interest paid on its flagship 123 current account will also be cut from 1.5 per cent to 1 per cent.

The bank said it had set aside £122million to cover loan defaults and losses related to the coronavirus, which took its credit impairment losses for the first three months of 2020 to £165million, eating into its profits.

Fellow high street bank HSBC announced this morning its profits for the first three months of 2020 were half what they were last year, as it set aside an enormous £2.4billion to cover coronavirus-related defaults and losses.

Santander said it expected its income to be further impacted by the record low Bank of England base rate of 0.1 per cent and ‘significantly reduced new business related to the lockdown’.

It said this would be ‘partially offset by changes to deposit pricing’, with the savings cuts coming into effect in the second half of this year.

The majority of the sales, which Zoopla said are worth just under £1 billion in estate agency fee income, were agreed between November 2019 and February 2020.

They would have been set to complete between April and June.

Zoopla said the number of sales being agreed is running at a tenth of the levels recorded in early March, with volumes similar to what would be expected around Christmas time in late December.

The Government has said that, where a property is currently occupied, home-movers should do all they can to amicably agree alternative dates to move.

People can still continue to move in limited circumstances, such as in cases where the property is vacant.

Zoopla said the rate of sales falling through peaked on March 23 – the day stricter social distancing measures were imposed.

Demand from would-be buyers fell by 70 per cent between the start of March and the week ending March 29. The fall in demand bottomed out in early April and has since seen a slow improvement, Zoopla said.

Buyers can still go online to do ‘virtual viewings’ of properties they are interested in.

Zoopla’s report said that, over the past two weeks, demand for housing in cities across northern England has rebounded more strongly – notably in Manchester, Liverpool and Leeds.

These are all cities where 2020 started strongly and where housing affordability remains attractive, and where we could see a faster bounce-back when restrictions lift.

By contrast, higher value cities such as Cambridge, Edinburgh and Southampton have not yet recorded any material improvement in demand over the past few weeks, according to the report.

Zoopla now expects the number of completed sales across the UK this year to be around half of 2019 levels.