UK lenders have granted nearly 1.2 m payment holidays on credit cards and personal loans for customers struggling with the Covid-19 outbreak.
Figures released by the banking lobby group UK Finance show that by the end of April payment holidays had been granted for around 700,000 credit cards and around 470,000 loans had been put on pause.
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Banks have also offered to waive interest on overdrafts of up to £500 for 27 million customers, the industry body said.
Its chief executive, Stephen Jones, said: “Many people across the country are facing financial pressures due to the coronavirus, and lenders are taking decisive action to help them through these tough times.”
UK Finance urged customers to apply to put repayments on hold only if they needed immediate help. It said interest would still be charged on most credit cards and personal loans during payment holidays.
Customers have been able to request a freeze on payments for up to three months since early April, when the Financial Conduct Authority introduced emergency measures to help protect vulnerable customers.
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The measures were designed to help consumers and renters who were not benefiting from other relief measures including mortgage holidays and the government-backed coronavirus business interruption loan scheme (CBILS) for business owners.
This week data collected by economists at Capital Economics showed that 2 million households in the UK had applied to access mortgage holidays.
It said five UK banks accounting for 57% of the country’s mortgages had either received applications for or approved 1,150,000 payment holidays by mid- to late April.
Capital Economics said missed mortgage payments were likely to “blow past” levels seen during the 2008 financial crisis, when the number of mortgages that fell into arrears for at least three months peaked at 288,000.
“Admittedly, payment holidays are not treated as arrears, so borrowers have longer than usual to get their finances back in order. Still, to avoid breaching the previous record, a hefty 85% of households who currently have payment holidays would need to resume payments by September,” said Hansen Lu, a property economist.
Gareth Shaw, the head of money at Which?, said: “It’s encouraging to see the industry supporting so many customers so quickly, but it highlights the scale of the financial pressure people in this country are facing.
“Lenders must continue their efforts to inform customers, particularly those who are most vulnerable, about the help on offer. The regulator also needs to work with firms to ensure that customers who take a payment holiday are not plunged into unnecessary financial distress once it ends.”
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