mortgage holiday - future implications

mikechaos

Hello,
We have currently been accepted for the 3 month mortgage holiday due to us being affected by the Covid-19 outbreak. Our bank confirmed that there would no impact on our credit file and that the status of our mortgage would show as 'up to date' throughout the payment holiday.

If we apply for a new mortgage in the next 2-3 years. would the new lender be able to see that we have took a holiday, and if not, would they ask? Just wondering if there ma be any long term impact of the mortgage holiday

Thank you

sjc93

I believe that there's no impact on your credit score (as agreed by the government) as this is a global pandemic - your potential new lender, I think, given the circumstances will understand and I don't think it would impact your remortgage. I'm sure if they see it on your file, that they may ask but once you confirm it was during this pandemic then I don't think anything further would be asked.

A lot of people will be in your boat in the next few years when they're looking to remortgage their property, so I expect they'll have underwriters fully aware and will implicate some form of soft check just to be sure you still kept on top of your payments after your holiday.

mikechaos

Thanks. I only asked as some comments on another board suggested that it could be viewed as an indicator of risk in the future. 

bradders1983

Anyone who thinks lenders wont take this into account in the future is bonkers. Yes they may say they wont and yes they say the holidays wont impact on credit ratings, but if Lender B sees that you didnt have enough in savings to pay Lender A through all of this, I wouldnt blame them if they were cautious.

mikechaos

But how would they know? My lender (HSBC) said that our account would show as up to date on our credit files and that there would be no record of the payment holiday. Would a future lender ask if you have ever taken a mortgage holiday? This is the only way that I can see them knowing about it. 

bradders1983

No idea. Now, if you were remortgaging with the same lender they would obviously know...

Look at it from their point of view. If you lent your mate a grand a year ago and he asked for 3 months off in the middle of repayments, you granted him a holiday and he paid up eventually, how quick would you lend him another grand?

Grumpy_chap

mikechaos said:

But how would they know? My lender (HSBC) said that our account would show as up to date on our credit files and that there would be no record of the payment holiday. 

If you have a repayment mortgage, they will be able to see that the outstanding balance flat-lined rather than reducing by a small amount each month.

In the future, someone who demonstrated financial resilience must be seen as a better bet than a borrower who immediately needed support.

kuratowski

Grumpy_chap said:
If you have a repayment mortgage, they will be able to see that the outstanding balance flat-lined rather than reducing by a small amount each month.

Worse than flat-lining, the outstanding balance will actually go up, due to interest being accrued during the holiday.

blue_max_3

They may not hold it against you in 2-3 years, but it will form part of the overall picture. But if you needed it, you needed it. Little point in worrying about it now.

mikechaos

bradders1983 said:

No idea. Now, if you were remortgaging with the same lender they would obviously know...

Look at it from their point of view. If you lent your mate a grand a year ago and he asked for 3 months off in the middle of repayments, you granted him a holiday and he paid up eventually, how quick would you lend him another grand?

I get the point you're trying to make, but i'm that the analogy is quite right. Would it be more a case of....

I agree to lend my mate a grand. Half way through the repayments a totally unforseen international crisis means that he may struggle to keep up with his payments. I offer him the option of a 3 month payment break, which he accepts. At the end of the 3 months he is able to resume his payments and remains up to date, making up the 3 months that have been missed. A couple of years down the line he asks to borrow another grand. Would I lend it him? Almost certainly yes. 

I get that people need to have some emergency savings, however we are in totally uncharted territory right now. None of us really know when or how this is going to end. There may be people who have lost income who do have some savings, however with no clear end in sight and no guarantee that they will have a job at the end of this they may still take the mortgage holiday option and keep hold of the savings for if and when the banks stop offering support. 

bradders1983

Grumpy Chap crystalised it much more succinctly than I did above.