Mortgage: The first set of payment holidays will end next month – be aware of higher costs

Mortgage holidays essentially allow people to “pause” their monthly repayments for up to three months, although the payment freeze must be agreed with the lender. Rishi Sunak launched the scheme on March 17 in direct response to coronavirus issues.


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This scheme was followed up with other payment freezes concerning rent, credit cards and other debt obligations.

The scheme was welcomed by many who were worried about keeping a roof over their heads but those fears may come back soon.

As the scheme was announced and launched in March, some early claimants could see their mortgage holiday come to an end next month.

While it may be extended, current rules detail that mortgage holidays will have a standard length of three months.

The hope was that the economy and people’s finances would be back to relative normality following the break, however this may now be called into question as the country is still under strict lockdown rules.

If claimants are due to start covering their mortgage again from June, they will likely have an even costlier burden on their hands.

It has been revealed since the announcement that while the payments themselves would freeze, the interest generated would not.

This means following a mortgage holiday, claimants will have higher repayments with the added interest.

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Financial experts such as Martin Lewis have detailed that mortgage holidays should only be used as last resort because of this but they can still be applied for where needed.

Anthony Morrow, the CEO of OpenMoney, cautioned people currently considering a payment holiday: “I strongly recommend people approach any payment ‘holiday’ with an air of caution.

“While payment pauses should help ease immediate pressure, money will still be owed in the future – and in most cases with added interest.

“It’s important to remember that a mortgage holiday is a freeze and not an eradication. The money does need to be paid back and in the meantime economic conditions could continue to worsen for people.


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“Always read terms and conditions carefully and speak to your provider if there’s anything you’re unsure of.”

Thankfully, Anthony provided useful advice for those stuck with increased interest costs: “If you do find yourself having to cope with extra interest payments further down the line, you should do what you can to prioritise making those.

“If this applies to you, try your best to take a careful look at your finances and start to cut back on any unnecessary outgoings where you can.

This might mean cancelling some subscription services or cooking at home rather than ordering food in.

“Remember too that if you’ve got some cash savings, it could be a good idea to use these to help clear extra interest charges– as it’s likely the cost of this will be higher than the interest you’re making on your savings.”

As professionals and institutions started to analyse mortgage holidays, they also provided mortgage holiday “calculators”.

These tools can help people work out what they’ll owe in advance of taking the break and there are many of them freely available online.

Various public institutions have also updated their websites with information on mortgage holidays and impartial advice can be sought from the likes of the Money Advice Service, Citizens Advice and the Money and Pensions Service.

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