Mortgage payment holidays and mortgage product transfers

Borrowers may pay too much mortgage interest due to mortgage payment holiday

If your current mortgage rate is about to end, and you are seeking to request a coronavirus mortgage payment holiday from your Lender, be careful.

A number of major lenders have already told us that borrowers on a mortgage payment holiday will not be able to swap their mortgage rate.

This means you could easily find yourself unnecessarily on your lender’s standard variable rate for up to 3 months.

For example:

Halifax currently offer rates as low as 1.18% on product transfer.

A borrower whose current mortgage rate ends at the end of April, having requested a mortgage payment holiday, will find themselves stuck on the lenders standard variable rate of 3.74% until their mortgage payment holiday ends.

Remember: A mortgage payment holiday allows you to roll up your interest and capital repayment for up to 3 months and add it to your lending (holiday from payments). It does not mean you have a holiday from paying interest.

Requesting a mortgage payment holiday before sorting out your mortgage product transfer could prove expensive.

A borrower with £250,000 lending with Halifax could pay up to £1,600 unnecessary interest if they do not handle matters in the correct order.

Recommended process for mortgage payment holidays and mortgage product transfers

If you are requesting a mortgage payment holiday you should firstly check when your current mortgage product rate ends. If that is in the next four months you need to decide if you should complete a mortgage product transfer before starting your mortgage payment holiday. This is also the case if you are already on the lender’s standard variable rate.

Your lender can advise you on this, but given the difficulties getting through to lenders in the current environment, it will be quicker and easier to consult an authorised and regulated mortgage brokerage such as A Mortgage Now.

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