Payment Holiday

Nic Rotton – Commercial Mortgage Consultant

You may recall my ‘musings’ from a few weeks ago on the subject of mortgage payment holidays and my nervousness of property landlords taking advantage of this offering as part of the wider Government COVID response.

I did stress that the option was there for those who really needed it, but that taking a payment holiday did come with consequences. The Lenders and Government were keen to confirm that the holiday would not impact on someone’s credit rating, however we are now seeing that this is clearly starting to have an impact on a Lender’s decision on any new lending requests.

On receiving the criteria for a new product release from one lender, it clearly stated that ‘no payment holiday applications with any lender’ would be acceptable and it appears they are not the only funder to include this requirement.

I have also had a conversation with a borrower who was keen to apply for a loan with a lender he has an existing relationship with. The Lender response was to advise that, as his existing loans are ‘holidayed’, they would have to take account of the borrower’s financial position. If they are struggling to meet current obligations, then no new facilities would be sanctioned.  They have given the client the option to bring their account up to date, assuming that the holiday payment had not been taken, but this has meant a time delay and inconvenience to both borrower and lender.  It’s not yet clear as to whether all lenders will offer this as a solution.

It’s important that you mention any holiday payment agreements to your broker as soon as possible, as I sense a few more funders will follow a similar path and it will impact where they can place your business.

Key criteria example

  • Fully residential only
  • Maximum valuation £500k
  • Minimum valuation £100k
  • Refinance only on a property that is currently holding a charge by a long-term known mortgage lender. This includes property changing the ownership from personal name(s) into a corporate entity providing the underlying ownership is identical
  • Desktop valuation valid for 3 months only (for lenders use only and will not be shared)
  • Borrower to provide internal and external pictures
  • Borrower must consent to Open Banking
  • Experienced landlords only
  • A1 credit record
  • No payment holiday applications with any lender
  • Property must be currently rented via AST for at least 6 months (to be supplied)
  • Minimum income of £50k