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Mortgage lenders have effectively been banned from repossessing customers’ property until the the coronavirus crisis passes.
Firms have been ordered to treat homeowners fairly by the Financial Conduct Authority watchdog (FCA) and given a stern warning against evicting any customers.
Amid fears that struggling homeowners could be denied a mortgage “payment holiday” ordered by ministers if they had previously slipped into arrears, the FCA has outlined how it expects firms to act in the interests of consumers.
This included banning repossession unless the homeowner has agreed. This ban will apply to all new instances of arrears and any existing repossession orders must also be halted.
In a note issued to banks and building societies, the FCA warned firms they must grant customers a mortgage “payment holiday” of three months to all homeowners who request one if they are struggling with Covid-19.
Banks must also ensure that there are no fees applied to customers other than the additional interest accrued, as a result of the payment holiday.
The regulator has also issued formal guidance to ensure that customer credit scores are not damaged by the payment holiday. There had been fears that some lenders would record any holiday as a “missed payment”, leaving a black mark on their credit file.
Homeowners in financial trouble are being urged to contact their bank immediately to ensure they get the support they need.
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Christopher Woolard, the interim chief executive of the FCA, said: “We want to help firms support consumers during these unprecedented times.
“Our mortgage guidance underpins the actions taken by mortgage providers and will give confidence to both consumers and firms.
"In particular, we are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time.”
Mr Woolard said the regulator will continue to review its rules as the coronavirus crisis develops.
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