Treasury Minister gives banks all-clear to turn down borrowers who took loan repayment ‘holidays’ during lockdown
A Treasury Minister has given banks the all-clear to turn down borrowers who took loan repayment ‘holidays’ during lockdown.
In a letter seen by the MoS, John Glen has said a payment holiday may impact a lender’s ‘willingness to provide credit’ – even though Ministers previously promised that borrowers would not be affected.
More than three million people – many of whom are being paid by the Government’s furlough scheme – used payment holidays having been assured it would not affect their creditworthiness. 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 having been assured it would not affect their creditworthiness
But the MoS has revealed that customers are now being turned down for mortgages because they took a payment break. The City watchdog has allowed banks to inspect account data to work out if someone took a holiday on repayments.
In a letter to Labour 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 file. This could include asking the customer whether they have taken out a payment holiday as well as assessing income, expenditure and future ability to make repayments.’ McDonagh, who sits on the Treasury Select Committee, said: ‘Yet again the Government is backing up the banks in bad behaviour.
‘People were clearly misled by the Government and the banks that if they requested a payment holiday it would have no impact on their future ability to borrow.
‘They’ve used a sleight of words – they’ve said it won’t affect your credit scoring, but it can still be taken into account.’
Film editor Dave Wilson, 44, said he was unable to move his Santander mortgage to a new property because he took a payment holiday. He is trying to move to a new house to make room for his third child with wife Jane.
He said: ‘When the Government said we could take a penalty-free holiday, I thought it wouldn’t be a bad thing to do. Our biggest bugbear is that we were not told at the time that it would have an effect on our ability to remortgage.’
A Santander spokesman said it is reviewing Mr Wilson’s case. It said a payment holiday should not impact a customer’s request to port a mortgage to a new property.