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Saturday 30th May 2020

Mortgage payment holidays could be extended for 18 months in a bid to help cash-strapped home owners

Much-needed financial respite

Good news could be in the pipeline for Brits struggling to pay their mortgage during the coronavirus crisis.

Back in March, chancellor Rishi Sunak announced that lenders had to offer customers a three-month mortgage payment holiday.

The change came into effect as lockdown measures and the furlough scheme was announced.

Home owners could get a much-needed mortgage holiday extension (Credit: Photofusion/Shutterstock)

Now, those struggling to pay their mortgage may be able to extend payment holidays by a year to 18 months.

Trade body UK Finance said lenders have already agreed to freeze one in seven UK mortgages.

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This means banks and building societies have agreed to freeze 1.6 million mortgages for cash-strapped Brits.

The Times now reports that the Financial Conduct Authority is looking at extending the mortgage holidays for some.

Rishi Sunak instructed lenders to allow payment holidays as lockdown begun (Credit: Splash News)

The measures, if introduced, will help to prevent borrowers from defaulting on their mortgage and homes being repossessed.

Borrowers split into three groups

Home owners could be split into three groups, under the new plans.

The first are those who can return to normal repayments after three months.

The last thing anyone wants is a repeat of the 1980s and 1990s, kicking families out of their homes onto the streets.

The second group are Brits who have a good history of repayments but need the freeze extended in the short-term due to the impact of coronavirus.

Those with no real chance of repaying their mortgage and may need debt advice fall into the third category.

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The news comes after the Bank of England's warning that 1.5 million jobs could be lost as Britain faces its worst-ever recession.

One banker said: "The last thing anyone wants is a repeat of the 1980s and 1990s, kicking families out onto the streets."

However, the new measures would only be a freeze on payments and, of course, interest would be accruing all the time you're not paying your mortgage.

One in seven home owners have so far been granted a mortgage holiday (Credit: Unsplash)

A three-month payment holiday is said to add £9 a month on to the cost of the average £132k mortgage.

What happens next?

However, the FCA said it hasn't yet made any final decisions about what happens next.

A rep revealed: "We are currently working with firms, consumer and debt advice groups, and government, to consider what other forms of support may be needed when the payment freezes come to an end."

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