The coronavirus crisis has had far reaching effects on people’s incomes. In a bid to mitigate the pressure on people, the government announced in March that mortgage holders would be entitled to a so-called ‘payment holiday’ in the wake of job losses and wage cuts.
The measure means eligible customers will have the capital sum of their mortgage payment deferred for three months – although the interest will continue to accrue.
After calls from campaign groups to give greater protection to renters, chancellor Rishi Sunak later announced a rent holiday that would allow tenants to defer payment for three months. Landlords could in turn apply for a payment holiday on their mortgage.
Since the announcement, one in nine mortgage holders in the UK has taken a payment holiday, but one leading mortgage lender has said many landlords who are applying for a break in their mortgage repayments are doing so unnecessarily.
Broker Mortgage for Business accused some landlords of “taking advantage” of the emergency measure, saying that only “a handful” of landlords contacting the business about mortgage repayment holidays had legitimate financial concerns caused by the coronavirus crisis.
Steve Olejnik, managing director of Mortgages for Business, warned abusing the scheme could “play out badly for the landlord”.
He said landlords are expected to have enough money to protect their investment to mitigate the impact of any void periods, and warned asking for a payment holiday without good reason could affect any future applications.
“Landlords must be aware that any requests could potentially damage any approaches to that lender,” he said.
“Lenders expect landlords to be able to cover void periods under normal circumstances – where a property is empty, and a landlord isn’t getting any rent – so they won’t take kindly to landlords trying to take advantage of them just to build up some cash reserves.”
For most buy-to-let lenders it is not enough for the tenant to be struggling to pay rent for a landlord to be granted a repayment break – a landlord must also prove they are in financial hardship.
Olejnik said: “The message is simple. Do not approach lenders for payment holidays without first taking advice and thinking about the longer-term consequences. Don’t jump on the repayment holiday bandwagon! Any deferred payments will have to be made at some stage and it could create problems down the line – especially when you come to refinance or grow the portfolio.”