The Financial Conduct Authority (FCA) has today set out draft guidance to ensure that firms provide support to mortgage borrowers affected by Covid-19. This guidance aims to support mortgage borrowers who have used payment deferrals but continue to face financial difficulties, as well as those whose financial situation may be newly compromised by coronavirus.
Commenting on the announcement, StepChange Debt Charity Director of External Affairs Richard Lane says: “We’re pleased to see the FCA telling firms that they should not rush to possession action for people whose mortgage problems have arisen due to Covid, and that firms should not take a “one size fits all” approach. It’s vital that there is ongoing recognition of the fact that, for many people, the financial aftershocks from Covid will take a while to subside, even for those whose finances will be sustainable in the long run.
“We’re also pleased to see the clarity with which the FCA sets out its expectation that people’s credit records should not be affected by having taken payment holidays if they resume their contractual payments and agree a mechanism for clearing arrears with their lender. However, we think there is still the risk of unintended consequences out of CRA reporting, both on mortgages and more generally. We would like to see more reassurance that the mechanisms agreed by lenders will be truly affordable, taking account of people’s wider financial commitments. It’s clear that the regulator still anticipates an impact on many people’s credit records. It’s important that this doesn’t result in counterproductive behaviour, with people potentially trying to protect their credit status at the expense of truly affordable payment plans – for a great many people, ongoing forbearance and a reduced payment plan will be the only right and sustainable option, despite the credit status impact.”