Mortgage holidays – what you need to know
In March, the Chancellor’s announcement of a three-month mortgage payment holiday came as a great relief to millions of homeowners suffering from the financial impact of the coronavirus pandemic. In agreement with mortgage lenders, the government stated that any customers ‘in difficulty’ could apply. As the full impact of the crisis became clear, the scheme was later extended for a further three months until 31 October.

Since the scheme’s launch, 1.82 million1 customers had, by late May, benefited from payment holidays – equivalent to one in six mortgages across the UK.


The scheme works on a self-certification basis; homeowners in financial difficulty can contact their lender and state that their income has been adversely affected. They do not need to prove this by supplying any documentation. Most lenders offer a no-fee, online application process. For those worried about their credit rating, credit agencies have agreed that current credit scores will be protected for as long as the payment holiday lasts.


While payment holidays are proving a temporary lifeline for many, they should not be confused with free money. Taking a payment holiday won’t reduce the outstanding capital you owe, nor will it prevent interest from accruing. So, while it is a valuable option to consider, you should be aware that it will increase the time it takes to clear your debt and, when they resume, your monthly payments will increase.


It is crucial to speak to your lender first before stopping payments. If you stop paying your mortgage without applying for the scheme, you will go into arrears and harm your credit rating – which could prevent you from borrowing in the future. If you’ve only got a few years of repayment left, you’ll see your monthly payments surge once the holiday comes to an end.


You may be worried about your finances, but don’t panic and rush into a decision. It’s crucial you discuss your individual circumstances with your lender first to see if a payment holiday is suitable for you. There have been reports of borrowers panicking and applying for a payment holiday too early.

1UK Finance, 2020

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.