With mortgage payment holidays extended for another three months for those who need it, will those who have taken one now see repercussions on their credit score if they apply for an extension?
In a bid to prevent mortgage holders from facing a sudden financial cliff-edge at the end of June, the Government made the decision last month to further extend mortgage payment holidays until the end of September. The payment holiday scheme is specifically designed to ease financial stress for those facing money issues due to loss of work, being furloughed or sick leave due to COVID-19, and would not negatively affect credit scores.
Now the scheme has been extended, lenders, including Nationwide, are recommending that a temporary mark is placed on the credit scores of those requesting a further extension to their mortgage payment holiday - but not to prevent them from being able to remortgage. The credit mark would flag that as the borrower has requested a further payment holiday extension, indicating that they may be in financial difficulties. Without this, they could apply for new loans or credit, putting more financial stress on the individual.
The Treasurer and regulators have yet to decide whether taking an extension to a mortgage payment holiday will affect credit scores. We shall have to wait and see whether this becomes a reality; however, it does reiterate the point that you need to be mindful and seek advice before applying for a mortgage payment holiday, as there could be consequences at a later date.
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