Martin Lewis issues warning to those who are considering taking mortgage holidays
1 June 2020, 11:56 | Updated: 1 June 2020, 12:01
The Money Saving Expert has said people should be wary about taking a mortgage payment holiday.
It was recently announced that those struggling to pay their mortgage due to coronavirus will be able to extend payment holidays for three more months.
These holidays are already available, with the Financial Conduct Authority (FCA) proposing that the time to apply for one will be extended until October 31.
However, now Martin Lewis has warned This Morning viewers against applying for payment holidays unless they really need to.
Speaking to Holly Willoughby and Phillip Schofield by video link from his home in North London, the Money Saving Expert said: “I need to be really plain here, this is something to do only if you need it and you should not do it if you don’t need it.”
Martin went on to explain that while the scheme gives families a break from having to meet monthly mortgage payments, the interest continues to go up.
This means by the end of the six-month period, your monthly rate could go up a significant amount, as he added: “It could go up by £50, £75 or even £100 a month.”
The 48-year-old also said that while the mortgage holiday won’t officially go on your credit file, mortgage companies can see if you have used the scheme which means it could even have an effect on what you can borrow in the future.
In a recent newsletter, he wrote: "My hope is that as these holidays are specifically for the short-term financial hit of coronavirus – and as the practice is so widespread – it won't be used by many firms, and where it is it won't tarnish individuals' credit reputation for too long.
"Most importantly, I don't believe this should stop anyone who needs a mortgage holiday from getting one – if it's crucial for cash flow, just do it.
"Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I'd err on the side of caution."
More than 1.8 million mortgage payment holidays have already been taken up, and the first of these are due to come to an end in June.
Those who are still experiencing temporary payment difficulties due to coronavirus will be offered continued support - while the current ban on homes being repossessed will also be continued until October 31 under the plans.
Meanwhile, Martin added that all homeowners should look at reducing their mortgage by changing lenders.
He said: “It’s a no brainer right now, UK interest rates are at their lowest for 325 years - they are as low as 0.1% at the moment.
“This means you should be checking to see if you can cut the cost of your mortgage.”
Find out more about how you can do this at www.moneysavingexpert.com.