The mortgage payment holiday scheme was announced back in March 2020, in an effort to support homeowners who have been hit financially by the coronavirus crisis. Earlier this month, UK Finance announced that so far, one in six homeowners had used the scheme.
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This equates to 1.9 million homes across the country accessing the mortgage holiday scheme.
In the two weeks between March 25 and April 8, 1.2 million homes had used the scheme.
As such, between Thursday June 15 and July 8, they will be coming to the end of the initial three-month holiday.
While lenders are letting people extend the holiday again for a further three months – up to October – borrowers are being urged to consider another option.
Now, homeowners are being encouraged to think about their next steps, and there’s been the suggestion that those who can afford to resume payments consider doing so.
Mortgage broker Habito has addressed the matter, highlighting some of the benefits of checking whether those homeowners could remortgage and get a cheaper deal – as opposed to extending the holiday.
An example six-month calculation by Habito for a £250,000 mortgage on a two-year fixed deal for 1.82 percent finds that taking a six-month mortgage holiday would mean monthly payments rise by £25 per month from £940 to £965.
Over the lifetime of the mortgage, the mortgage broker says the borrower would pay an additional £4,435 in interest.
Commenting on moving mortgage deal, Cassie Stephenson, VP Operations at Habito, said: “A must-do for every homeowner coming to the end of their initial mortgage holiday is seeing whether they can remortgage to a new deal.
“Remortgaging is simply the term for switching your current mortgage deal, to a new deal with a lower rate of interest – it’s the same as regularly switching your energy, phone, or internet bill.
“When you first take out a mortgage, you’ll get a tempting deal at a cheap rate, locked in for two, three, or five years.
“When that time is up, you automatically get moved to your lender’s much more expensive rate – called a standard variable rate (SVR).
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“If you’re coming out of your mortgage holiday and preparing for your repayments to go back up, it really could pay to shop around for a cheaper, money-saving deal.
“It’s estimated that 850,000 UK homeowners will be moving on to their SVR in the next six months and the cost of not switching is in the region of £3,500 every year.
“That’s a family holiday or some serious home improvements.
“At a time when money is particularly tight for some, remortgaging can provide serious savings for the time involved – particularly as switching can take a few clicks, and is generally a much simpler process than a first mortgage application.
“If you’re concerned about your current mortgage situation or if you’ve been put on furlough, or taken a mortgage holiday – you could still be eligible to switch to a cheaper rate.
“Speak to a free, whole of market broker, as they’ll also be able to see exclusive deals that are even cheaper than if you went directly to your lender.
“If you still need help, do speak to your lender about your repayment options going forward.
“You can also extend your holiday for a further three-months to October, but of course – this money does have to be repaid and the longer you have a holiday, the more expensive it will be in the long run.”
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