Updated: 2 Novmber 2020
Ipswich Building Society’s Guide to Mortgage Payment Deferrals, including Representative Examples
What is a mortgage payment deferral?
A mortgage payment deferral is an arrangement where a lender permits a borrower to make no payments under a regulated mortgage contract for a specified period without being in payment shortfall.
The Government issued a statement on 17 March detailing some of the financial support available to those whose finances have been affected by Covid-19. This included the provision of mortgage payment holidays, which are now also referred to as mortgage payment deferrals, following updated guidance from the Financial Conduct Authority (FCA).
In November 2020 the FCA confirmed an extension to the mortgage payment deferral scheme until 31 July 2021, with final applications due by 31 March 2021. The extension gives access to those who have not yet sought support, or who have had a payment deferral of less than the maximum six months available.
Those who are newly impacted by coronavirus and who want to benefit from the maximum six months available should apply in good time before their February 2021 payment is due.
Can I get a mortgage payment deferral at Ipswich Building Society?
Payment deferrals are not a regular feature of the Society’s mortgage products. However, we recognise these are difficult times and want to help by providing a temporary mortgage payment deferral to our borrowers who have had their income negatively impacted due to the COVID-19 pandemic. The Society can agree a maximum three month payment deferral at a time. The maximum deferral period is six months in total.
Society borrowers who are currently up to date with their mortgage payments, and who are experiencing payment difficulties as a result of circumstances relating to coronavirus (Covid-19), can self certify to receive a mortgage payment deferral for three months.
The deadline to request a mortgage payment deferral is 31 March 2021, and all mortgage payment deferrals must end by 31 July 2021.
Completed self-certification request forms must be received by the Society no later than the deadline of 31 March 2021.
Please note that where you can afford to make your monthly mortgage payments you should continue to do so.
You should only apply for a mortgage payment deferral if your ability to make your monthly mortgage payments has been adversely affected by Covid-19.
Important reasons for this include:
• Interest will continue to accrue on your mortgage during the payment deferral period.
• You will need to make up the deferred mortgage payments and unpaid interest at the end of the deferral period.
• Your future monthly mortgage payments are likely to increase to ensure your mortgage is repaid at the end of its current term.
• The total amount payable under your mortgage contract will also increase to take into account the deferred monthly mortgage payments and interest.
Society borrowers who are already in payment shortfall or mortgage arrears and whose finances have been impacted by Covid-19 must contact us in the first instance to discuss the options available.
Our Collections team are available by phone between 9am and 5pm Monday to Friday, on 01473 278510 or at [email protected]. We are currently experiencing high call volumes and operational challenges presented by the Covid-19 pandemic, however, we will answer your query as soon as possible.
Key details of the Society’s temporary three-month mortgage payment deferral scheme
• No payments will be due on the outstanding mortgage balance for three months only, and no arrears will accrue on your account during this time.
• Interest will continue to accrue during the three-month payment deferral period.
• Monthly instalments will resume after expiry of the three-month payment deferral.
• If you currently pay by Standing Order, you will need to contact your bank and amend your instruction accordingly, if you have not already done so.
• If you currently pay by Direct Debit, you do not need to contact your bank as we will ensure that no payments are collected during the payment deferral period.
• Future monthly instalments will be adjusted to ensure that any unpaid capital and/or interest is repaid over the remaining term, which will mean the remaining monthly payments over the term of the mortgage will increase.
• Monthly instalments will be recalculated no later than the third month of the payment deferral, ready to take effect when monthly instalments resume.
• It is your responsibility to decide when the best time might be to implement your payment deferral period. The commencement date is chosen by you on application. However, please note the deadline to request a mortgage payment deferral is 31 March 2021, and all mortgage payment deferrals must end by 31 July 2021.
• The arrangement will not be reported to credit reference agencies and will not affect your credit record. However, please remember that lenders may use information obtained from other sources, such as bank account information, in their lending decisions.
• No charge or fee will be applied for arranging a mortgage payment deferral.
Making an informed decision about taking a mortgage payment deferral
It’s important for borrowers to understand the impact of taking out a mortgage payment deferral before choosing to do so.
To enable borrowers to make an informed decision about whether to take a payment deferral, representative examples are provided below to illustrate:
• the increase in mortgage balance owed, and
• the increase in monthly mortgage payments required
when a 3-month payment deferral is taken on an outstanding mortgage balance of £100,000 where interest is being charged at the Society’s current Standard Variable Rate.
Example Account 1 gives an illustration for a capital and interest (repayment type) mortgage and Example Account 2 illustrates an interest only mortgage. Both examples show:
• The increase in capital balance owed at the end of each month. This happens because the interest due for the month is added to the mortgage balance at the end of the month.
• The increase in the monthly payment amount. This is required to ensure that the increased mortgage balance will be repaid over the remaining mortgage term.
Borrowers should carefully consider the information provided in the representative examples before completing a self certification request form to take out a payment deferral with the Society.
How do I self certify to receive a mortgage payment deferral?
To proceed with a mortgage payment deferral, please complete and return our self-certification request form by post or by email to [email protected] (we suggest using secure email where possible).
Completed self-certification request forms must be received by the Society no later than the deadline of 31 March 2021.
What happens if my circumstances change during the payment deferral period?
• If your income is no longer going to be impacted for as long as originally expected, you may wish to contact us to reduce the length of your payment deferral to just one or two months.
• If you find you have the means and wish to make a mortgage payment or a part payment towards your monthly instalment while in the payment deferral period, you may still do so. This will reduce the amount of interest accrued during the payment deferral period.
• If your financial position has not been affected as you first thought, you may decide you no longer require the financial assistance of a mortgage payment deferral. In this event please contact us to cancel the arrangement.
• If you find that your income reduction is likely to become permanent rather than remain temporary, please contact us on 01473 278510. The Society takes an individual approach with all its borrowers and our trained Collections staff will be able to support you by discussing the options available to you and agreeing the most appropriate next steps.
Our Collections team are available by phone between 9am and 5pm Monday to Friday, on 01473 278510 or at [email protected]. We are currently experiencing high call volumes and operational challenges presented by the Covid-19 pandemic, however, we will answer your query as soon as possible.
What happens when my three-month mortgage payment deferral ends?
In keeping with the conditions of your payment deferral, the unpaid capital and interest will be repaid over your remaining mortgage term. This is called capitalisation.
As a result your monthly instalment amount will increase to ensure your mortgage is repaid at the end of its current term. The total amount payable under your mortgage contract will also increase to take into account the capitalised monthly mortgage payments and interest.
We will do this automatically unless you tell us this is not what you want to do (‘opt out’) and you would like to consider other possible ways to repay the unpaid amount.
We will write to you in the month before your mortgage payments are due to recommence, to confirm the amount of your new monthly mortgage payment and your mortgage balance including the capitalised monthly mortgage payments and interest.
What other options are available at the end of the payment deferral period?
Should you wish to opt out of capitalisation please contact us on 01473 278510 to discuss an alternative approach to repaying the amount owed.
Please note that whichever repayment option is selected you will pay additional interest, however, the shorter the repayment term the less interest you will pay.
Alternative repayment options include:
• Extending the mortgage term by the same period as your mortgage payment deferral. If you feel unable to meet the revised monthly mortgage payment going forward, you may prefer to extend your mortgage term by the same number of months as your payment deferral. Whilst this would produce a lower increase in your monthly mortgage payment than via capitalisation, the total amount payable over the life of your mortgage will be higher.
• Immediate repayment of the unpaid capital and interest. If your income was not affected in the way you first thought, you may have the means to repay the unpaid capital and interest in full, or in part, by way of a lump sum. Repayment in full would place your mortgage account into the position that it was prior to taking the mortgage payment deferral. As a result, repayment in full is the most cost-efficient solution for borrowers.
• Regular monthly overpayments. If your monthly household income has been reinstated, you may have the means to increase your monthly mortgage payment amount to repay your deferred payments over a shorter period than the remaining mortgage term. Making regular monthly overpayments to repay the unpaid capital and interest is usually for a maximum of 12 months and would mean higher repayments in the short term, but less additional interest over the life of your mortgage than with capitalisation.
What happens if my financial difficulties are still ongoing when my three-month payment deferral period ends?
If you expect to experience extended financial difficulty beyond the three-month payment deferral which will impact your ability to make your mortgage payments, please contact us on 01473 278510, so we can discuss and agree options to support you.
The Society may provide a further three-month payment deferral period where your finances continue to be impacted by Covid-19. This would mean a total of up to six month’s support for those who need it. Please be aware that:
- All the mortgage payment deferrals must end by July 31 2021.
- You will need to contact the Society in the first instance to discuss your need for on-going support. Please call us on 01473 278510.
- Your initial payment deferral will NOT be automatically extended, and a further self-certification form will need to be signed and returned. Completed self-certification request forms must be received by the Society no later than the deadline of 31 March 2021.
- After 31 March 2021 the Society can only accept a second payment deferral subject to the following:
- The deferred period cannot exceed 6 months in total
- There is no gap between the first deferral period and the second deferral period
- The second deferral must end on or before 31 July 2021.
- Continuing with a mortgage payment deferral may not always be in your best interests, and if so, we will work with you to find an alternative.
- The Financial Conduct Authority (FCA) guidance is that where you can afford to resume your mortgage payments at the end of your payment deferral period, you should.
Where can I obtain further help and advice?
The FCA has published information about how to access help and advice when dealing with financial difficulties during the coronavirus pandemic.
• https://www.fca.org.uk/publications/finalised-guidance/information-consumers-financial-difficulties-coronavirus
The Money and Pensions Service (MaPS) has launched an online tool designed to help people who have seen their finances impacted by Covid-19, by providing guidance which is personalised according to their needs. If required, the tool will also help to find specialist support from other organisations for problem debt or arrears.
• Money Navigator – Money Advice Service
Free Debt Advice Services
If you would like to speak to an independent organisation about your finances, there are lots of free support and advice services available. We’ve listed some of these organisations below.
• Money Advice Service
Tel: 0300 500 5000
• National Debtline
Tel: 0800 808 4000
• Step Change Debt Charity
Tel: 0800 138 1111
The Money Advice Service can also help you locate sources of free debt advice.
The Society is happy to liaise with any third party organisation acting on your behalf if we hold your written authority to do so.
How to contact us
If you have any queries please call our Collections team between 9am and 5pm Monday to Friday on 01473 278510, or email us at [email protected]. Please note we are currently experiencing high call volumes and operational challenges presented by the Covid-19 pandemic, however, we will answer your query as soon as possible.
