Liz Booth looks at what the end of the stamp duty holiday and the FCA’s latest guidance means for mortgage brokers
There are clouds on the horizon of the UK housing market. Firstly, the government’s stamp duty holiday is due to end on 31 March; and secondly, the risk of defaults on mortgages is growing as more people lose their jobs in the Covid-19 crisis.
There is no news as yet on the stamp duty holiday, although a growing number of groups from construction through to surveyors and all those in between have been calling on the Chancellor Rishi Sunak to avoid a cliff-edge ending to the scheme.At the time of writing, it was announced that MPs would debate the stamp duty holiday extension at the beginning of February.
David Thomas, chair of the Society of Mortgage Professionals, warned the ensuring clients have a clear understanding of what to expect is vital. “We know that lenders have been desperately trying to temper demand through a variety of pricing and criteria changes, but that hasn’t stopped the recent wave.
“That pressure is now starting to move into our legal colleague’s hands, and with just a few months still to go, the management of clients’ expectations will be critical. “It is likely some will miss the deadline, and whilst some may still benefit from recent house prices, there will inevitably be a focus from clients in this area,” said Mr Thomas.
Brokers may be right in calling for a delay to the end of the stamp duty holiday – the Chancellor has already responded to calls on mortgage payment holidays. In early November, he announced mortgage payment holidays are being extended for homeowners financially affected by the pandemic.
Borrowers who have not yet had a mortgage holiday can request a pause in repayments, which can last up to six months. Those who have had their payments deferred already (some 2.5 million people, according to UK Finance), can extend their mortgage holiday up to the six-month limit.
Borrowers who have already reached the maximum six-month mortgage holiday and are still facing difficulty making repayments, are being advised by the Financial Conduct Authority (FCA) to speak to their lender about a tailored support plan.
Since November, the FCA has been working on new guidance and published that draft in January. It gave the profession until 18 January to respond and planned to announce the guidance formally as Personal Finance Professional went to press at the end of January.
The FCA explained: “The Payment Deferral Guidance provides for exceptional and immediate support to mortgage customers facing temporary payment difficulties due to circumstances related to coronavirus.”
Under that guidance, eligible customers may defer up to six monthly payments, provided that the last deferral relates to payments falling due no later than July 2021. The FCA added: “Where a customer indicates that they may be experiencing, or they reasonably expect to experience, payment difficulties as a result of circumstances relating to coronavirus, a firm should offer any support the customer is eligible for under the Payment Deferral Guidance before providing support under this Tailored Support Guidance.”
The FCA has stressed that in line with the standards they always expect from firms, they want firms to deliver the following outcomes:
- Customers receive appropriate forbearance that is in their interests after consideration of their individual circumstances.
- Firms support their customers through a period of payment difficulties and uncertainty, including by considering their other debts and essential living costs.
- Firms recognise vulnerability and respond to the particular needs of vulnerable customers.
- Firms have systems, processes and adequately trained staff, with any staff incentives aligned with providing their customers with the help they need.
The payment deferral guidance also states that a firm should contact customers in good time before the end of a payment deferral period.
If the customer indicates that they expect to continue to face payment difficulties, the firm should treat the customer fairly. It should work with the customer to resolve these difficulties before payments are missed. Unless the customer objects, the firm may capitalise the deferred amounts.
In terms of repossessions, the FCA said: “There is no ‘one-size-fits-all’ approach to how long firms should offer forbearance before starting a court process but action to seek possession should be a last resort and not be started unless all other reasonable attempts to resolve the position have failed.
“Firms should be mindful of the need for fair and appropriate treatment of customers who may be particularly vulnerable, including as a result of circumstances related to coronavirus. Firms should consider carefully the potential impacts on customers of ongoing possession proceedings when considering whether it is appropriate to commence or pursue repossession proceedings in a particular case at a time when a warrant for possession will not be sought.
“Firms should ensure that they keep their customers fully informed, and discuss with them the potential consequences of their suspending any steps to enforce repossession.”
Liz Booth is consulting editor of PFP