What does a mortgage holiday mean?

As the coronavirus hit the UK, Chancellor Rishi Sunak announced a three-month mortgage payment holiday for those struggling. 

What is a mortgage holiday?

A mortgage holiday is a period when a mortgage holder does not pay anything towards their mortgage costs. 

All banks have to provide this option to those affected by the coronavirus pandemic.

How does a mortgage payment holiday work?

 It’s not free. A mortgage holiday does not mean the payments are forgiven. Only deferred. After a mortgage holiday you pick up right where you left off.

However, future payments will increase slightly. Any unpaid interest accrued during the holiday will be added to the debt. Only the capital sum of the loan payment remains unchanged.

To figure out what your new mortgage payment would be after a mortgage holiday, use a mortgage calculator. Because interest rates are quite low, the difference could be minimal. 

Is it a good idea?

About 1 million mortgage holders have already applied for a payment holiday. For many, it is much needed relief. 

But banks are saying many are jumping the gun, possibly to their own detriment. 

Because mortgage payments will rise from the interest, banks suggest paying if you can. Only take the holiday if there is a real worry about making the next payment.


If a full mortgage payment is difficult, but a full mortgage holiday is going a bit too far, consider a reduced payment plan or an interest-only mortgage payment plan. Most banks are offering these.

These partial payments can help you avoid the increased payments after the holiday period. 

To help you decide which option is most suitable for you, compare your average income and monthly expense with Monday Dashboard’s free tools. This will help you see how any differences could impact your balance. 

Don’t just cancel your direct debit

Taking a mortgage holiday or alternative will not impact your credit score. All three UK credit agencies have said they will not use it in their credit calculations during the coronavirus freeze. 

But this is assuming you have agreed to terms with your mortgage provider. Do not take matters into your own hands and just cancel your payment. That will come back to haunt you. Your credit score would take a hit and you would have penalties from your mortgage provider. 

How to get a mortgage holiday payment

To get a mortgage payment holiday, you need to call your mortgage provider and confirm that you qualify. Mortgage repayment holidays are being considered on a case-by-case basis, and the length of any suspension can also vary between banks.

They will have your job and income details from when you first applied for a mortgage, which will help them to make a decision.

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All content is for informational purposes only and is the opinion of the author. Nothing on this website should be interpreted as "advice". Money Dashboard Ltd make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use.

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