Clients affected by Coronavirus (COVID-19) - Mortgage payment advice

Information for borrowers facing payment problems due to coronavirus.

This content applies to Scotland

First steps for borrowers

Borrowers facing a reduction in income due to workplace closure, self-isolation or sickness should check insurance policies such as income protection and policies that come as part of a bank account or home insurance.  

Latest information

The FCA has updated their guidance to lenders. From 1 April 2021, a lender may be able to take steps to enforce a possession order and repossess a home. The FCA advises that they should only do so as a last resort.

The most up to date information can be found on the FCA website.

What support is available?

The FCA reiterates that consumers should keep up with payments on their mortgage if they can afford to do so and should only seek support where such support is absolutely necessary. The FCA has also provided more detail on which groups of consumers will and won’t be able to access payment deferrals:

  • Those who have not yet had a payment deferral will be eligible for payment deferrals of 6 months in total.

  • Those who currently have a payment deferral will be eligible to top up to 6 months in total. 

  • Those who have previously had payment deferrals of less than 6 months will be able to top up, as long as total deferrals don’t exceed 6 months. This includes those receiving tailored support and those who are behind on payments. 

  • Borrowers who have already had 6 months of payment deferrals will not be eligible for a further payment deferral. Firms will provide tailored support appropriate to their circumstances. This may include the option to defer further payments.

The FCA has confirmed that firms will continue to offer tailored support to borrowers.

How long is support available for?

Consumers had until 31 March 2021 to apply for an initial or a further payment deferral. After that date, they will be able to extend existing deferrals to 31 July 2021, provided these extensions cover consecutive payments, and subject to the maximum 6 months allowed. Full details can be found in the FCA Payment Deferral Guidance.

Requesting a payment break

There is no specific application form to request the payment break. Borrowers should contact their lender to discuss options. The lender may ask for more information, or evidence such as medical advice to self-isolate, or confirmation of a workplace closure or suspension of employment. Borrowers who are already in arrears may not meet the lender’s criteria for deferring payments. If the borrower is already in arrears the lender should come to an arrangement that minimises the risk of possession (but see the general pages on mortgage arrears for options in these circumstances).

UK Finance has stated that they do not expect the payment break to negatively affect borrowers’ credit reference files. Lenders are co-ordinating reporting to credit reference agencies to ensure a consistent approach. The Information Commissioner’s Office website has information about how payments and defaults are reported to credit reference agencies.

Borrowers should be made aware that although this gives some protection to them with regards to credit reference agency reports, lenders may consider a range of other information when making decisions on lending, including information about a borrowers bank account, use of credit and amount of debt owed.

Interest rates

Reductions in interest rates announced by the Bank of England will only affect contractual payments for variable rate and tracker mortgages. Borrowers with fixed rate mortgages can contact their lender to find out whether a cheaper option is available. Some lenders may allow interest only payments for a temporary period.

FCA rules

The Mortgage Conduct of Business Rules have not been updated to include coronavirus specific guidelines. The FCA published a statement  on the impact of coronavirus for borrowers which reiterates the need to treat customers fairly. MCOB 13.3.2A requires lenders to make reasonable efforts to reach agreements with borrowers in payment difficulties and to allow a reasonable time to repay arrears. The lender must not take possession action unless all other reasonable attempts to resolve the position have failed.  

Rule 13.3.4A requires lenders to consider extending the term or changing the type of mortgage. They should also consider treating a payment shortfall as part of the original loan.

The latest FCA guidance also states that (in relation to any repossession action prior to 31 October 20202):

  • 'We consider that commencing or continuing repossession proceedings at this time is very likely to contravene Principle 6 and MCOB 2.5A.1R - absent exceptional circumstances (such as a customer requesting that proceedings continue). We will not hesitate to take appropriate action where necessary.'

The MCOB Handbook and the most up to date statements from the FCA can be found on the Financial Conduct Authority website.

Refusal to allow payment break

The Financial Ombudsman Service can deal with complaints about mortgage lenders who refuse to allow the payment break or who issue possession proceedings for arrears that have accrued as a result of coronavirus related difficulties. The Ombudsman can also deal with complaints about insurance policies that have not paid out when they should have, or if it becomes apparent that the policy was mis-sold. Coronavirus information for borrowers is also available on the Ombudsman website.

Eviction ban and Repossession

The Scottish Government introduced protections for mortgage borrowers.

Mortgage lenders were prevented from enforcing repossessions:

  • in level 3 or 4 Tier areas

  • from 23 January 2021 - 9 August 2021

Sheriff officers were not permitted to carry out the enforcement of repossessions during these dates.

During this period:

  • Mortgage lenders could still serve notices and raise court action

  • Decrees for repossession could still be granted at court

Scotland moved out of the levels system on 9 August 2021, so the restrictions on repossession enforcement is no longer in place anywhere in the country.

There is information for mortgage borrowers on the FCA website.

Further information on repossessions

All sheriff courts are now open but procedures vary between sheriff courts.

Advisers should check the Scottish Courts Website for the most up to date information.

If the borrower was unable to attend a hearing and a repossession order has already been made it may be possible to recall the decree. Seek advice from a solicitor as to the merits of doing this.

Last updated: 6 August 2021