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What happens when my mortgage holiday ends?

Millions of borrowers took advantage of the mortgage payment holiday — but what happens when the mortgage holiday ends?

"Mortgage holidays" are in the headlines again — but this time, it's because they're drawing to a close. The mortgage holiday was one of many initiatives the government put into place to help those suffering financially because of coronavirus. On Tuesday 17 March 2020, the government announced that homeowners could apply for a “holiday” from their mortgage — essentially, a break from payments.

And it’s estimated that at least 1.9 million homeowners took part — or about 1 in 6 of all mortgages in the UK. But it was only put into place until the end of October. Any new applications (or applications for extensions) have to be in by October 31 — and many homeowners will find their repayments starting again soon. Some may be ready to start remaking payments, others may find that they still need support.

Not sure where to start? We've got you covered.

What does a mortgage holiday mean?

Good question. The holiday was a break from your payments, without the normal repercussions that would come from missing payments. This means if you weren’t making payments or only made partial payments, they wouldn’t show up as missed payments on your credit report. 

While a holiday means a break from payments while you’re suffering financially, it doesn’t change the total amount you pay back. Instead, payments are basically put on pause. 

For many, that means that they will have larger payments to make when the holiday ends — although in most cases it will be only slightly larger. Extending the period of the loan may also be an option to keep the payments down.

What can I do now?

If you were one of the millions using a mortgage holiday, you have a few different options once it comes to a close — though it may be down to your individual lender. 

  • Resume full monthly repayments

  • Consider a remortgage

  • Switch to an interest-only mortgage

  • Ask to extend your mortgage payment holiday or make partial payments

Remember, millions of households took advantage of the mortgage holiday — so you are not alone."

If you’re in a financial position to resume full repayments, that’s likely your best bet — it will get you back on track to pay off your mortgage in the time frame you were expected without garnering too much extra interest. 

But many people are still struggling financially from the effects of coronavirus on the economy, so you may need to consider other options. Remortgaging can lower your payments, especially with interest rates so low, but they may increase the time you’ll be paying back the debt.

You can also switch to an interest-only mortgage, but it’s important to remember that you won’t be paying off the principal, so you’ll need to switch back to a repayment mortgage if you want to own your home outright.

You can also talk to your lender about extending the holiday or making partial payments. Applications for the government-backed initiative have to be in by the end of the month, but you can always talk to your lender about options — it's just that their approach may change after the holiday ends.

Because the mortgage holiday was part of a government initiative, those missed payments (if discussed with your lender) shouldn’t hurt your credit. But if there are missed payments after the holiday ends, those could affect your credit if you haven't made an arrangement with your lender. So it’s important to get in touch and find an agreement for moving forward.

Feeling overwhelmed? Remember, millions of households took advantage of the mortgage holiday — so you are not alone. There are plenty of resources, like the Money Advice Service, with advice on how to handle your payment holiday coming to an end. If you want more information on mortgages, check out our complete mortgage guide — or our free mortgage advice.

It’s easy for financial stresses to make you want to bury your head in the sand, but it’s crucial to face them head-on. You may be in a position to resume payments right where you left off or you may need to ask about other options and support. There’s help out there if you need it.