As the Financial Conduct Authority (FCA) issues its updated coronavirus guidance ‘Mortgages and Coronavirus: Payment Deferral Guidance’, safeagent asks if mortgage deferral is the answer for buy-to-let landlords, or if now it’s time for government grants to support landlords?
The FCA guidance says:
- Firms should allow customers to extend ongoing payment deferrals after 31 March 2021, to cover payments up to and including July 2021, provided these deferrals cover consecutive payments. Subject to the overall maximum of 6 months, we expect firms to offer payment deferrals to customers flexibly when they request them, in tranches up to three monthly payments in a single payment deferral period. This means that customers can choose whether or not to take them consecutively until 31 March 2021.
- Customers who are newly impacted and applying for a first payment deferral need to apply in good time before their February 2021 payment is due if they want to benefit from the maximum 6 months deferral.
- Firms should not report a worsening status on the customer’s credit file during any payment deferral period.
Isobel Thomson, safeagent Chief Executive:
“It’s positive to see the FCA supporting borrowers impacted by the pandemic with this latest guidance which advises lenders should offer up to six months of mortgage payment deferrals and guarantee it won’t affect a landlord’s credit rating.
“However, while buy-to-let landlords impacted by tenants’ rent arrears clearly need support, we question if deferral of mortgage payments is the answer, or if it pushes the problem further down the track. While lenders will be adhering to the guidance which provides up to six months deferral, we know it may take badly affected tenants much longer to get back on their feet, meaning landlords could be building up debt and struggling to meet mortgage payments for many months to come.
“We know the good work that agents and landlords are doing to sustain tenancies where tenants are in financial difficulties. But it’s vital that if we are going to keep landlords in the PRS, their financial viability is also maintained, ensuring no unnecessary reductions in the supply of rented housing and helping prevent homelessness.
“We believe there is more to be done. Our recent proposals for a sustainable post COVID PRS suggested that those landlords who build up debt because they are unable to pay entirely or are only partially paying what is due on their mortgage due to a shortfall in their tenant’s Universal Credit, should be eligible for a grant from the Government, similar to the coronavirus small business grant. This would recompense them for the shortfall on their mortgage and any additional interest over the period. This is particularly important for landlords with a small number of buy to let properties, who rely heavily on this income.
“safeagent is also calling on lenders to commit to no exclusions terms in new or existing buy-to-let products that prevent lettings to tenants who are claiming benefits. This is important to ensure tenants on benefits can continue to access the PRS now and in the future.”