Households hit by coronavirus will not lose credit ratings if they delay payments as the government gives a 3-month mortgage holiday.
The unpaid interest will still be recovered later, but individual credit ratings will not be affected.
The Guardian has suggested that ‘firms will help customers the best way for the individual, but an automatic payment holiday may to always be the most suitable approach and may not be required by all customers’.
Full payment of the arrears will still assume an eventual full repayment of arrears. While a person is taking a payment holiday, the interest that would have been paid will still rack up, and the capital sum of the loan remains.
These holidays are not a long term solution but they are designed to help the temporary income shortfall. If this is a smooth and seamless process that will enable homeowners to self-isolate without having to worry about their mortgage payments then clearly it is a significant move in the right direction.