How we work out your new monthly payment

The mortgage payment holiday (deferral) scheme is ending

  • The scheme has now closed for new applications. If you're worried about your monthly mortgage repayments, contact our Credit Management team.
  • Existing payment holidays (deferrals) can still be extended as long as they don’t exceed 6 months total, and are taken continuously without any breaks.
  • All payment holidays (deferrals) will end by 31st July 2021.

With a mortgage payment holiday (deferral) the payments you make towards your mortgage are suspended, however the interest on your mortgage balance is not and the time left on your mortgage (your mortgage term) continues to reduce. This means that when the payment holiday (deferral) ends, we need to recalculate your monthly payment across your remaining mortgage term to make sure that your mortgage balance will still be repaid within the remaining mortgage term.

Example of a repayment mortgage

The example below shows how this might work for a repayment mortgage (where you pay back the capital balance of the mortgage as well as interest each month). The figures in the example are illustrative only of how the process works. The letter we send when your payment holiday (deferral) is due to end will contain detailed figures for your own mortgage account(s).

An example of how we work out new monthly payments

Graph showing how we work out new monthly payments
  1. Before the payment holiday (deferral) starts, monthly payments are made as normal.
  2. While the payment holiday (deferral) is in place, no payments are received towards the mortgage.
  3. We need to make sure the payments that were missed during the payment holiday (deferral) are accounted for, so we recalculate the monthly payments. This is to ensure the total mortgage balance will still be repaid in the remaining term.

How a mortgage balance might be affected

  1. Before the payment holiday (deferral) starts, payments are made each month as normal. Interest falls due each month and the monthly mortgage payments paid by the customer cover the interest and then the mortgage balance reduces by the remainder of the monthly payment amount each month.
  2. While the payment holiday (deferral) is in place, no payments are received towards the mortgage so the balance is not reducing each month but the interest is still falling due. This means the mortgage balance increases each month.
  3. After the payment holiday (deferral) ends, a new monthly payment is due. The monthly payment is recalculated to take the mortgage balance and remaining term into account giving a new monthly payment. Upon payment from the customer, the interest falling due is covered and the mortgage balance begins to reduce again across the term.

What happens next

We’ll write to you at least 7 working days before your mortgage payments resume. This letter will confirm your new monthly payment and give you some further options you can choose from, which you can also find on our Your options after a mortgage payment holiday (deferral) page.

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