Repayment relief has been provided for credit card borrowers © Matt Cardy/Getty Images

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The UK financial regulator has told mortgage, loan and credit card borrowers they may seek further repayment holidays following the government’s announcement of a second lockdown in England to contain the coronavirus.

The Financial Conduct Authority said on Monday that further relief would now be offered to struggling mortgage borrowers, and set out a similar package of measures for users of consumer credit.

Although the government said the new lockdown in England would be reviewed on December 2, the FCA has also instructed banks to extend payment deferrals to mortgage borrowers for up to six months.

Customers who did not take a mortgage holiday after the spring lockdown was introduced may now seek a break from repayments of up to six months, if they are in financial difficulty. Borrowers who have already had one payment holiday of less than six months will be allowed to extend that deferral up to the maximum half-year period.

But the FCA said borrowers who have already taken a full six-month payment holiday this year and need further help will have to speak to their lenders to agree an alternative form of “tailored support”. Customers who foresee longer-term financial difficulties are advised to do the same.

Guidance over the summer from the regulator suggested tailored support could involve accepting reduced payments or restructuring a mortgage term.

Consumer groups welcomed the extension of support. “With a tough winter ahead for many consumers, we called for financial support measures to be extended, and it’s good to see the regulator taking action,” said Gareth Shaw, head of money at Which?. However, he called for “normal credit reporting” to be suspended, so that consumers’ future creditworthiness was not adversely affected.

Industry data show that 2.5m mortgage repayment holidays have been granted since the start of the Covid-19 pandemic, but only 162,000 were still in force last month.

Users of consumer credit products — including personal loans, credit cards, motor finance, rent to own, buy-now pay-later, pawnbroking and “payday” lending deals — were also told on Monday that payment deferrals could now be extended to six months.

New applicants may seek payment holidays of up to six months, while those who took a three-month payment deferral under the FCA’s July guidance may apply for a second deferral. About 1.9m of these initial three-month repayment holidays have already been claimed.

Peter Tutton, head of policy at debt charity StepChange, also demanded a longer-term strategy to avoid over-indebtedness. “Household debt built up due to the pandemic had soared to more than £6bn in May, a figure almost certain to have swelled further in the past five months,” he said. “We need to see short-term fixes replaced by a long-term, cross-government strategy that supports struggling households and prevents the build-up of unmanageable debt.”

UK Finance, the banking trade body, said that lenders would tell borrowers how to apply for new payment holidays in coming days. “Customers seeking to access this support do not need to contact their lenders yet,” explained Eric Leenders, managing director of personal finance at UK Finance. “Lenders will provide information after today on how to apply for this support.”

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