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By Andy Thurston

The UK government announced in March 2020 that anyone affected by the impact of Covid-19 and the various lockdown measures and travel restrictions that are in place, or expects to be adversely affected will have the option of taking a mortgage payment holiday for a period of 3 months. Initially this was targeted at homeowners with residential mortgages however it was expanded the following day to include landlords with BTL mortgages.


Borrowers can apply for the payment holiday by contacting their lender and self-certifying that their income will be directly or indirectly affected by the Covid-19 pandemic. As this is a self-certification process the lender does not need to review or approve the application, so a mortgage payment holiday is essentially an option that is available.


Whilst it is perhaps an easy option to apply for a payment holiday regardless of your personal situation, there are several factors that should be considered.

  • Do you really need to take a payment holiday? There is no application required so if applied for, a payment holiday should be granted, however if you are a landlord and your tenants are currently paying rent then there should be no reason to request a mortgage payment holiday at this stage.

  • A prudent landlord should have sufficient cash reserves to cover void periods for at least a couple of months so should not require a payment holiday unless all tenants stop paying rent immediately which in turn would cause significant financial pressure. The tenant profile of a portfolio is likely to influence the level of cashflow impact i.e. a portfolio consisting of primarily ‘gig worker’ tenants would be harder hit than a portfolio of tenants from the emergency services. If there are cash reserves in place, then a landlord should consider deploying these funds to make the mortgage payments before approaching the lender for a payment holiday.

  • A mortgage payment holiday does not mean that the payments for the 3 months are written off, most lenders will simply add the payments that were due to the mortgage balance therefore increasing future monthly payments as interest will have accrued during the holiday period. The FCA have confirmed that interest on mortgage balances will still be charged unless a lender has stated otherwise. The increase in the mortgage payment will be relatively minimal compared to the previous amount due however this should still be considered. Some lenders may require the payments to be made up in a shorter time period so our advice would be to speak with the lender in question and find out how they will look to implement this.


If the landlord makes the decision to take a mortgage payment holiday, then this should not impact on the individual’s credit history. The FCA have issued guidance which makes it clear to lenders that a borrower taking a payment holiday will not have a negative impact on their credit payment history.


Whilst taking a payment holiday should not adversely impact the payment history on the credit file some thought should be taken as to how the current lender, or indeed lenders in the future may view the action taken by a borrower to apply for a mortgage payment holiday, particularly those that apply as soon as the scheme has been made available.


A lender is unlikely to publicly announce that taking a payment holiday will have a negative impact on the borrower in the future however some lenders’ risk teams may consider this when underwriting new applications in the future.

  • A borrower requesting a payment holiday immediately, perhaps even before a tenant was due to make a payment. The lender may take the view that the borrower is abusing the system in order to retain cash or has poor financial management.

  • If the borrower has pipeline applications in with a lender to refinance an existing property or to purchase a new property (for example) but requests a payment holiday on an existing mortgage with that lender it is likely the lender will pause new applications. The lender will want to investigate the borrower’s cashflow position in more detail and may ask for a detailed explanation/business plan. Alternatively, the lender may choose to reduce LTV’s on new applications or may decline considering any new business for the borrower on the basis of their wider affordibility.

  • A borrower applying to a lender for a BTL mortgage but has existing BTL mortgages with other lenders – the new lender may request information regarding the performance of the existing portfolio and if any payment holidays are currently in place. The new lender may be reluctant to support new borrowing if the applicant is already receiving assistance with cashflow from other lenders – responsible lending being one of the main considerations.


These are clearly challenging times for everyone, and some landlords may be experiencing more problems than others - everyone’s individual circumstances are likely to be different. The above points are just some things to consider prior to opting for a payment holiday however if you have any mortgage concerns then you should look to speak with your lender to discuss in the first instance.


  • Andy Thurston

The challenges in the property market are continuing according to the latest data from HMRC, with May 2019 delivering the lowest number of sales for the month since 2012.


Property transaction figures from the taxman show there were 89,830 sales on a non-seasonally adjusted basis last month. This is the lowest figure for May since 75,350 transactions were recorded in 2012.


Regionally as usual there were big variations.

  • The biggest drop was in Wales, where sales fell 24.5% over the month to 3,040 and 30% down compared with 12 months ago.

  • Transactions in England rose 2.3% on a monthly basis to 75,640, but were down 4.7% annually.

  • In Scotland, sales fell 0.7% over the month to 7,920 and were down 4.5% annually, while volumes rose 9.4% in Northern Ireland on a monthly basis to 2,230 but fell 0.8% annually.

This data supports the anecdotal evidence we are seeing daily with our clients, who are increasingly seeing their capital tied up in finished stock awaiting sale, and development finance lenders applying some pressure on repayment. Whilst the market remains subdued for sales, and the continuing political crisis appears not to offer any immediate respite, there are other financing options that clients can consider.



Capital tied up in finished stock awaiting sale

Subject to the rental income and yield profile of any finished schemes, there are a lot of options for raising a BTL or portfolio mortgage to repay the development finance and potentially release some of your capital. This also means the interest will be meet from the rental income rather than continue to roll up into the facility on a development loan. equity as well as replacing the debt on more favourable terms.


Alternatively, for those committed to selling the stock and not converting to short/medium term rentals, there are several short-term loans on the market that are designed to provide “Sales Period” funding. These products are sometimes referred to as “Developer Exits” as it replaces the development finance loan with a new facility, can free up locked in capital and provide the time you need to sell into this market. Typically, the lender will take 100% of the sales proceeds every time you sell a unit, but in cases where the overall loan is low relative to the value of the property you may be able to receive a percentage of the proceeds as well.


There are a range of potential tax and VAT implications that need to be considered in conjunction with your professional accountancy advisor, and you will clearly lose any new build premium. However, it is an alternative to waiting for existing stock to sell, considering deep discounts or missing out on new opportunities where you might be able to buy into new projects at attractive prices given market sentiment.




  • Andy Thurston

The government has lent £11bn to 211,000 home buyers in five years and it is clear this has concentrated building, lending and buying activity into the sub £600k market segment. The National Audit Office (NAO) has said today that Help to Buy is exposing taxpayers to “significant market risk” should property values fall.


Providing 40% of the property value in Greater London and 20% in the rest of the UK has fuelled demand and correspondingly supply creation as house

builders and developers focus in this segment. Has it been positive or negative for the market?



Help to Buy - a positive or negative?


Pro’s

  • Helped 170,000 first time buyers onto the market (housing minister)

  • Increased home building by 15%

  • 40% of new build sales have been supported by the scheme

  • New build annual sales increased from 61,357 to 104,245 since introduction in 2013

Con’s

  • NAO claim two thirds of purchasers using the scheme could have bought without the scheme. Is this driving higher levels of homeowner debt that is necessary?

  • Has the current £11bn – forecast to be £29bn by scheme maturity in march 2023 – just inflated prices and exposed buyers to the risk of overpaying?

  • Given the lag between land acquisition, new build start and completion of the units will the supply tail work through as the demand stimulus falls away? Could this expose those developers and house builders to material risk on their sales forecasts?

What we do know is that debt availability stimulates house prices.


We have the combination of this government stimulus at the same time as all time low interest rates, you can’t help but think these two combined are an explosive combination. Time will tell but developers and house builders should think twice before thinking the Help to Buy market is a one way bet for future schemes.


I applaud the Government being proactive in trying to support the housing market. We need to remain focused on how to achieve higher levels of housing provision that is affordable to society. However this scheme feels like a stimulus that risks driving short term pricing volatility rather than address the fundamental challenge to the sector which continues to be the inefficiency of the planning system and the availability of finance and capital to SME house builders and developers.

E: info@financewell.co.uk

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