Chancellor Rishi Sunak is said to be in talks for an extension of the mortgage holidays scheme, which will give struggling homeowners a longer break on their repayments during the pandemic.
The initiative, confirmed in March and due to expire at the end of June, was initially introduced to pause payments for three months during the coronavirus outbreak.
However, the government is now in discussions to prolong the scheme for borrowers who may face a "cliff edge" in June when the relief ends, according to the Financial Times.
More than 1.6million mortgage customers have so far taken advantage of the relief from making payments.
The banking body, UK Finance, estimates this is an average of £755 a month.
But it is not free money. It will still have to be paid back later on with interest charges on top, though your credit score will not be impacted by it.
The problem the Treasury is grappling with is that a sudden end to the scheme could produce a cliff-edge effect for those who are still out of work or subject to pay cuts because of the pandemic.
A spokesman for the financial regulator, the Financial Conduct Authority (FCA,), said: "We are currently considering what support will be needed for customers reaching the end of a mortgage payment freeze. We have not yet made any final decisions but we will make an announcement soon."
One idea is that the mortgage scheme would be extended for a further three months with the rules on applications tightened.
Money expert Salman Haqqi,, said: "The government’s initial launch of mortgage holidays brought welcome relief for homeowners who had their income affected by the COVID-19 crisis.
"The scheme, where payment could be deferred with zero negative impact to credit ratings, resulted in up to one in nine homeowners making use of the initiative. Though a formal announcement is yet to be made, many businesses are still closed and the full extent of job losses is still becoming clear, so any extension to the scheme will be welcomed.
"Should homeowners wish to look into a payment holiday on their mortgage, it’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid. This means that your monthly payments will likely go up slightly after the payment holiday ends.
"While the option to take a payment holiday on mortgages will have been a lifeline for many, if you are still able to make your payments in full, you should continue to do so."
Mirror Money has contacted the Treasury for a statement.
What is a mortgage holiday?
A mortgage repayment holiday is simply a financial 'break' from your monthly repayment. This is available for customers who are unable to make their usual monthly mortgage payments.
How will it impact my finances?
Payment holidays may not be right for everyone. It’s important to remember your payment will not be waived but simply deferred.
If you choose to take a payment holiday you will need to be aware that the amount you owe will increase as you’ll still be charged interest and the missed payments will be made up over the remainder of the mortgage term.
Will my credit rating be affected?
Taking a payment holiday will not impact your credit rating.
How much notice to do I need to give my Bank?
Each bank has its own timescale, it is typically between five to 10 working days from the time of your request.
If you’re concerned about making your monthly mortgage repayments, get in touch with your bank as soon as possible.
How do I apply?
Most banks have online forms to help make it easier for customers if they know this is the best option for them, look at your mortgage provider’s website for all of the contact options.
How long can I take a repayment holiday for?
Covid-19 repayment holidays are currently in place for a maximum of three months.
It’s important to remember your term will not be extended beyond this but if you’re still concerned about your monthly payments, then speak to your bank for help. They can assist and find the best option that is suitable for you.
Do I have to take three months?
No, you can take up to three months - if you think you don’t need the full three months, your bank can work with you on the right timescale for you.
Should I take a repayment holiday if I am financially secure?
It’s not advisable to take one if you don’t need it. They are designed for those in need of financial assistance and who know they will be unable to meet their monthly payments.
Remember, you will have to increase these payments later - so if you are financially secure and can avoid taking a repayment holiday, then it’s likely to be best for you to keep your monthly payments the same.
