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UK banks have approved over 1.2 million mortgage payment holidays for customers financially impacted by the coronavirus, according to a UK Finance study. Mortgage lenders initially announced the payment holiday options on March 17, and within three weeks, 1 in 9 mortgages in the UK were subject to a payment holiday. According to the study, this amounts to £260 ($325) per month in suspended interest payments for the average mortgage customer.
UK banks are approving 61,000 payment holidays daily, making it imperative for them to ensure they have the capacity to address this volume of requests through multiple channels.
Following the UK Financial Conduct Authority’s mid-March directive to extend three-month payment holidays to struggling consumers, banks saw a major increase in call volume and struggled to keep up — one NatWest customer said she was kept on hold for three and a half hours to inquire about a mortgage payment holiday.
Part of the problem was that some banks — including NatWest at the time — only offered the option through their call channels. Since then, many have launched online applications. With UK Finance reporting that phone lines still remain busy, banks should look to continue to launch and bolster online application processes in order to relieve some of the pressure on phone lines and ultimately speed up the approval process.
And with this fast-growing volume, banks need to ensure transparency around their payment holiday terms so that customers aren’t surprised when the period is up. It’s not enough for banks to only extend resources to help — they also need to be completely transparent about the terms of these resources, or they could attract backlash like what Bank of America, for example, faced last month when some customers found its mortgage deferment policy to be misleading.
Openly communicating the terms of payment holidays in clear, understandable language before customers exercise the option is imperative so that customers don’t feel misled or surprised by money that may be owed at the end of the holiday. That’s especially important amid the coronavirus pandemic, as banks risk lasting reputational damage if they are perceived as unsympathetic toward struggling customers: The fallout following the Great Recession proved that customers will remember how their banks respond in a crisis.
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