Payment holidays for non-mortgage loans hit a peak in March, helping to avoid a devastating spike in borrowers defaulting, according to a credit score firm.
One in 10 (10%) unsecured loans had static balances in March, indicating that these borrowers had opted to freeze repayments ahead of the March 31 payment holiday deadline, Equifax said.
It added that the percentage of frozen loans marked a “pandemic high” for this type of borrowing, overtaking peaks in July 2020 (8.5%) and January 2021 (7.7%).
From April 1, lenders have been providing tailored support for people continuing to struggle financially due to the coronavirus pandemic, taking personal circumstances into account.
This support is available to people whose payment holidays have ended, as well as those who are struggling for the first time.
Payment holidays were introduced by the Financial Conduct Authority (FCA) last year to support borrowers impacted financially by Covid-19.
Those struggling were given the option to defer payments for up to six months.
According to the latest data from the Equifax market pulse, static balances on mortgages peaked at 18% in June 2020 and are now back to pre-pandemic levels at 4.3%.
Paul Heywood, chief data and analytics officer at Equifax UK said: “As the economy reopens and many of the pandemic’s emergency support measures are phased out, it’s important we recognise how successful they have been in protecting the financially vulnerable in the UK.
“There are still a few warning lights on the dashboard, and this spike in borrowers requesting payment holidays is a sign that we are not out of the woods yet, but early indications tell us that we have avoided a devastating spike in people defaulting on loans.
“For lenders, identifying people in, or about to enter, financial difficulty is going to be a key theme of 2021, especially as Government support is curtailed.
“While for borrowers, the important thing for people to remember is that the end of these forbearance measures does not mean that there is no support available.
“A range of tailored support measures have been introduced in the last year, and guidance is readily available for those that need it.”