Martin Lewis on the “one big change” mortgage holders may miss from today’s rule changes

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Martin Lewis appeared on Radio 5 Live today to provide his very early insight on the new rules provided by the mortgage regulator. Today, the FCA detailed that firms must offer support to mortgage holders in the coming weeks if they’re still struggling with coronavirus but payment holidays will not extend beyond the current deadline of October 31.

Throughout the pandemic, the FCA and wider government have assured that credit files would not be affected by the taking of a mortgage holiday.

Martin acknowledged this but detailed that this key element is set to change as the new rules come into play.

As the Money Saving Expert detailed: “So what we know already is those who can’t pay and are struggling due to coronavirus are able to take mortgage payment holidays.

“They tend to last three months and they don’t go on your credit file but there are other ways that lenders can see that you have taken one.”

As Martin continued: “There is one big change here that people need to understand, until the 31st of October, it does not go on your credit file.

“But from the 31st of October if you need help because you’re struggling, it will go on your credit file.

“It will be there in black and white that it’s happened, the regulator says that this is because actually when lenders are making other judgments about you, the fact that you’re struggling with your mortgage is important because it may mean you shouldn’t be lent more money.

“My Martin Lewis interpretation of what that really means is, actually, many people took out mortgage payments holidays who didn’t strictly need it.”

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He explained that what the FCA was really saying is: “We’re trying to move from this to a strict: if you need it, you get help if you don’t need it, you don’t get help.

“And by putting on people’s credit files, it acts as a disincentive for people to get help as they know it means it will be more difficult to get a mortgage and other borrowing in future once it’s on the credit file.

“So it’s a shift the emphasis here from the we need to help everybody in the short term, too much more we are only going to help those people who really need help with and that’s coming from the 31st of October.”

Martin concluded this topic by making a clear distinction that consumers need to be aware of.

Many savers likely use the terms credit file and credit score interchangeably but Martin reminded listeners that they are two different things.

As he concluded: “Your credit file and your credit score are not the same thing.

“You don’t really have a credit score, the ones people get are just a loose indication of what one lender would think of you.

“The biggest thing that affects applications is affordability, which isn’t on your credit file.

“And if you’re not working and you don’t have income, then your affordability is going to be very poor.”

On this, Martin implored savers to only utilise mortgage holidays if they really need them.

Where mortgage holders are struggling they will need to act fast as the FCA confirmed today that holidays can only be requested up until October 31 and they do not plan to extend this deadline further.

While they were very firm on this, they did acknowledge that they will keep the guidance under review if circumstances change significantly.

They announced that consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.

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