Payment holidays (and the impending problem)

Last updated: 22/05/2020

More than 1.8 million homeowners have already opted to take a mortgage payment holiday due to the financial fallout of the COVID-19 crisis.

The Treasury confirmed an extension to the package earlier this morning, meaning those struggling to pay their mortgage are now able to extend their payment holiday for a further 3 months (you can read the Government's official press release here).

It could be a financial lifeline for so many households, but the longer-term implication is that homeowners will see their monthly payments rise when the payment holiday period ends.

Accelerate My Mortgage can help you offset these costs.

To get an idea of how our unique solution could work, let's use a simple example:

  • A homeowner has a mortgage balance of £150,000, paying an interest rate of 2.5% and has a remaining mortgage term of 20 years. Normally, the monthly repayment would be around £795.
  • The homeowner decides to take a 3 month payment holiday. Most lenders aren't willing to extend the remaining mortgage term (currently), which means the homeowners will have to pay back more per month for the rest of the mortgage term, as soon as the payment holiday period comes to an end. The mortgage balance will also have not gone down, meaning the homeowner will have to pay more interest.
  • Using this example, the homeowner will have to pay around an extra £13 a month for the rest of the mortgage term (assuming the same interest rate), rising to around £53 a month if they were to take a 12 month payment holiday (and these extra costs could be much higher for larger mortgages).

Our Mortgage Rewards programme enables homeowners to earn cashback from everyday retail purchases, with every penny accumulated automatically paid off your mortgage balance as overpayments.

We're currently partnered with over 50 of the UK's leading brands (and the list is growing quickly), so our aim is to help homeowners earn enough to help cover their additional monthly mortgage payments. We also reward homeowners that use our free mortgage switching service, which is designed to keep you on the best mortgage rates for your circumstances.

Mortgage Rewards can also help households overpay in the future (beyond COVID-19), reducing your mortgage balance and helping you reach mortgage freedom faster.

For example, using the 3 month payment holiday scenario above:

  • An additional overpayment of just £9 per month could result in you saving more than £600 of extra interest (cancelling out the impact of the payment holiday), and would also have the added benefit of helping you achieve mortgage freedom almost 4 months early.

To find out more about our Mortgage Rewards programme, click here.

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