From furlough leave to Universal Credit applications, Martin Lewis has been sharing a wealth of information for those affected financically by the coronavirus pandemic. Today, Mr Lewis issued a warning to people who may be looking into getting a mortgage holiday.
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It comes after Chancellor of the Exchequer Rishi Sunak announced on March 17 that mortgage lenders would offer three-month mortgage holidays, as an emergency measure to help affected borrowers.
Speaking at a daily press briefing at Downing Street last month, Mr Sunak said: “I can announce that for those in difficulty due to coronavirus, mortgage lenders will now offer a three month mortgage holiday, so that people will not have to pay a penny towards their mortgage costs, while they get back on their feet.”
However, Martin Lewis, the founder of Money Saving Expert, has since issued a warning to homeowners.
It came as he reported that some people have simply been cancelling their direct debits for their monthly mortgage repayments.
Today, Mr Lewis appeared on the LBC UK radio show, Nick Ferrari At Breakfast, during which he was asked for his advice for borrowers concerned that a mortgage holiday could have an impact their credit score.
Mr Lewis said: “If you do it right it won’t, but if you do it wrong, it will.
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“I’m hearing that some people are doing it wrong. Let’s just talk this through.
“A mortgage payment holiday is where your mortgage lender says to you, ‘You do not need to pay your mortgage’.
“Currently they’re doing it for three months. [For] most of the major lenders, you can now apply online for this.
“You don’t need to call them up and clog up their phone lines, and it can take as little as five minutes.
“It is quite an easy system – lots of success on it. Now what it means when you take a mortgage payment holiday is you don’t pay for three months.
“The interest does still tick up, and you will have to pay it back afterwards.”
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Mr Lewis explained how this could affect a borrower, giving an example of a person with 20 years left on their mortgage, who currently pays £700 a month.
By taking a three-month mortgage holiday, they would instead pay around £712 a month for the remaining 19 years and nine months, he said.
“So a moderate increase to get the cash flow benefit now, which for most people who are struggling is really needed to keep your head above water,” the financial journalist commented.
However, Mr Lewis pointed out that some people may be causing damage to their credit score, due to making a “big mistake”.
He explained: “The big problem is some people are trying to give themselves a mortgage holiday by simply cancelling their mortgage direct debits.
“That is a big mistake – that will hit your credit score. That is a very big negative. You mustn’t do it.
“A mortgage holiday has to be approved by the lender. Once it is, from that point on, not paying will not affect your credit score.”
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