Tag: Mortgage payment holidays

Who took out mortgage payment holidays during the pandemic?

Georgina Green

The take-up of mortgage payment holidays in the UK during the Covid-19 pandemic was extraordinary: according to UK Finance, holidays granted reached a peak of 1.9 million during the pandemic, or roughly one in six mortgages. But which households benefited from the scheme? In this post I use rich UK household survey data to conduct an in-depth analysis of the distribution of the debt-relief scheme at an individual level. I find that borrowers struggling to keep up with payments during Covid applied for a holiday, suggesting the scheme played an important role in preventing a sharp rise in defaults. There is also evidence that some households may have taken them as insurance against future shocks, possibly dampening precautionary spending cuts.

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Consumption effects of mortgage payment holidays during the Covid-19 pandemic

Alexandra Varadi and and Bruno Albuquerque

Mortgage payment holidays (PH) were introduced in March 2020 to help households who might have struggled to keep up with mortgage payments due to the pandemic. It allowed a suspension of mortgage principal and interest repayments for a maximum of six months, without affecting households’ credit risk scores. Given the novelty of the policy, we study in a new paper whether mortgage PH have supported household consumption during the pandemic, especially for those more financially vulnerable. Using transaction-level data, we find that temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those not eligible for the policy. We also find that PH led more financially stable households to increase their saving rates, not their consumption.

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