One in nine mortgage holders in the UK has taken a so-called ‘payment holiday’ as their finances have been adversely affected by the coronavirus, but landlords are being encouraged to think twice before requesting to defer mortgage payments.
Lenders have agreed that 1.2 million homeowners can delay repayments as jobs are cut and wages reduced.
Typically, this defers a mortgage bill of £775 a month, with borrowers given the option of delaying up to three months of repayments.
But broker Mortgage for Business says that only “a handful” of landlords contacting its switchboard about mortgage repayment holidays are raising legitimate concerns about how to pay their mortgage in the face of the Covid-19 pandemic.
While there are landlords who find themselves in genuine financial hardship as a result of Covid-19, the mortgage broker insists that most landlords it has been talking to in recent weeks have sufficient means to get them through this difficult period.
Steve Olejnik, managing director of Mortgages for Business, said: “We’re having a lot of discussions with landlords around payment holiday requests. Only a handful are raising legitimate concerns about how to pay their mortgage in the face of the Covid-19 pandemic.
“Quite apart from the moral implications of abusing an emergency mortgage repayment scheme brought in at a time of national crisis, it could play out badly for the landlord.”
Olejnik is urging landlords to think long and hard before submitting a request for a payment holiday to their mortgage lender.
He insists that landlords should not ask for a payment holiday unless they need it, if only because it could affect current and future applications.
He continued: “Landlords must be aware that any requests could potentially damage any approaches to that lender. 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.
“One borrower with three live cases with their lender approached them for repayment holidays on another, existing loan. The lender immediately cancelled all three. Smart landlords, who want to capitalise on short-term house price falls and expand their portfolios when the lockdown is lifted, should think long and hard before approaching their lender.”
Additionally, Mortgages for Business points out that most buy-to-let lenders will ask landlords to prove they are in financial hardship before granting any holiday request. While a landlord’s ultimate tenant may be in distress and unable to make rental payments – to benefit from the scheme, landlords also need to unable to meet their mortgage repayments.
Olejnik added: “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.”
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