RBS banks and others have agreed to a mortgage holiday because of the coronavirus. (AP)
Mortgage lenders agreed they will support customers who are experiencing problems with their finances as a result of COVID-19 after Chancellor of the Exchequer Rishi Sunak announced the stopgap late Tuesday as part of an "unprecedented package" of government-backed loans worth £330 billion ($385 billion).
Lenders owned by the Lloyds Banking Group and the Royal Bank of Scotland have all confirmed they will offer to defer mortgage payments from borrowers affected by the virus outbreak.
A spokesperson for RBS said Wednesday that the bank was “monitoring the potential impact of coronavirus across all our customers to ensure we can support them appropriately through any period of disruption.” The bank will look at customers’ situations on a case-by-case basis.
They join TSB, Virgin Money, Clydesdale Bank and Yorkshire Bank, which have already said they give customers who financially struggle the option to pause their mortgage payments.
The government said the three-month pause “will give people the necessary time to recover and ensure they do not have to pay a penny towards their mortgage in the interim.”
The chancellor did not set out further details of the plan or how it would work and instead anyone struggling with repayments are being advised to contact banks directly.
UK Finance, the banking trade body, has revealed some details.It said there will be a fast-track system for approval, but not everyone will be granted a payment holiday. The unpaid interest will still be recovered later, but individual credit ratings will not be affected.
“Firms will help customers the best way for the individual, but an automatic payment holiday may not always be the most suitable approach and may not be required by all customers,” UK Finance said.
Under Financial Conduct Authority rules, lenders must ensure that any “forbearance” would still result in a full repayment of arrears. Customers will also have to prove they have been affected by the coronavirus financially.
Further measures announced by Sunak on Tuesday include new legal powers in the Covid Bill to enable government to offer whatever further financial support it thinks is necessary to businesses and a new scheme being launched by the Bank of England to help major financial services firms bridge coronavirus disruption to their cash flows through loans.
The intervention comes weeks after the chancellor used his first budget to announce a £30 billion package to support businesses facing hardship from the economic fallout of the pandemic.
--Editing by Tom Mudd.
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