Citizens Advice Scotland (CAS) has warned that without additional support from lenders, people taking payment holidays from their mortgage face more expensive repayments in the long-term.
The Financial Conduct Authority (FCA) had yesterday confirmed that customers who have had a payment holiday and are still having difficulty making mortgage payments can be offered a further three-month extension. Also those customers who need a payment holiday but have not yet requested one, now have until 31 October 2020 to do so.
But CAS is highlighting that any missed payments get added onto the mortgage and interest is still charged on the mortgage during the payment holiday.
These missed payments and additional interest will mean increased payments for consumers at a later date.
CAS Financial Health spokesperson, Myles Fitt, said: “This updated guidance from the FCA is welcome news in the short term for people who are struggling to make mortgage payments as a result of coronavirus.
“But it’s important to remember that interest on mortgages is still building up when you take a payment holiday and the missed payments have to be paid back. This could leave people out of pocket in the long-term which will only add to their hardship.
“What would really make a difference to people in financial hardship would be the freezing of interest by mortgage lenders during payment holidays.
“We’ve also seen one lender voluntarily announce a year long hold on repossessions. All mortgage lenders should be offering this otherwise there is the threat of repossession once payment holidays come to an end for people who are still in difficulties and who just need a bit longer to recover.”