Payment holiday MAY affect home loan, minister says

Treasury Minister Gives Banks Green Light to Turn Down Borrowers Who Took Loan Repayment ‘Vacation’ During Lockdown

A treasury minister has given banks the green light to turn down borrowers who took loan repayment “vacations” during the foreclosure.

In a letter viewed by the Department of Health, John Glen said a payment holiday could impact a lender’s “willingness to extend credit” – even though ministers had previously promised borrowers would not be affected.

More than three million people – many of whom are paid by the government’s leave scheme – have used paid holidays after being assured it will not affect their solvency. Business Secretary Alok Sharma said in March that “it shouldn’t affect your credit score.”

In the red: more than three million people used payment holidays with the assurance that it would not affect their solvency

But the MoS has revealed that customers are now being turned down for mortgages because they took a payment break. The city watchdog has authorized banks to inspect account data to determine if anyone has taken time off on repayments.

In a letter to Labor MP Siobhain McDonagh, Glen said: “When considering whether or not to accept new loan or credit applications, lenders will look at a range of factors beyond a borrower’s credit history. This could include asking the client if they have taken a payment holiday as well as assessing income, expenses and future repayment capacity. McDonagh, who sits on the Treasury Select Committee, said: “Again , the government supports the banks in bad behavior.

“People have clearly been misled by the government and the banks to tell them that if they asked for a payment holiday, it would have no impact on their future ability to borrow.

“They used a sleight of hand – they said it wouldn’t affect your credit score, but it can still be factored in.”

Film editor Dave Wilson, 44, said he was unable to move his mortgage in Santander to new property because he took payment leave. He tries to move to a new house to make room for his third child with his wife Jane.

He said: “When the government said we could take a vacation without penalty, I thought it wouldn’t be a bad thing to do. Our biggest scarecrow is that we weren’t told at the time that it would have an effect on our ability to remortgage.

A spokesperson for Santander said he was reviewing Mr Wilson’s case. He said a payment holiday should not impact a client’s request to transfer a mortgage on new property.

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