Advice from financial regulator the FCA will reassure landlords that their cases will be treated generously and sympathetically should they not be able to pay their buy-to-let mortgages if their tenants stop paying the rent.
The Financial Conduct Authority (FCA) has issued guidance that reveals how landlords and other borrowers should be treated when applying for a mortgage holiday.
It has also revealed that the current three-month period could be extended and that landlords already in mortgage payment shortfall can access the scheme. Also, no additional fees other than mortgage interest can be charged.
Landlords need only indicate that they may potentially experience payment difficulties during the crisis to be granted a three-month payment holiday.
The FCA has also told lenders not to investigate the circumstances surrounding a request for a payment holiday, and only need to be provided with information suggesting difficulties for a lender to qualify.
This appears to be a significant relaxation of the current rules, where landlords and other mortgage borrowers are only offered mortgage holidays unless lenders have ‘good reason, good communication and documentary evidence’ of their difficulties.
Also, the strict affordability criteria often applied to buy-to-let mortgages will not apply when lenders offer landlords a payment holiday.
“We remind firms that the requirement to assess affordability does not apply where a firm varies the terms of a regulated mortgage contract or home purchase plan solely for the purposes of forbearance or to avoid a payment shortfall,” the FCA says.
These arrangements mean landlords’ mortgages will accrue interest on the outstanding sum during the payment holiday, and therefore the FCA says borrowers should be able to choose one or two-month payment holidays as well as three.
The FCA also says that both repossession orders obtained or planned against landlords who have fallen into arrears should not be pursued until the crisis is over, “given the unprecedented uncertainty and upheaval they face, and Government advice on social distancing and self-isolation,” it says.