Mortgage payment holidays could increase debt

Date:Monday 22nd December 2008
Author: Rachel Fletcher

Mortgage holders who take payment holidays could end up further in debt, finance website has warned.

Head of personal finance at the website, David Kuo, warned that interest would continue to accrue even if a payment break is taken.

Mr Kuo was responding to recent research by switching and comparison service uSwitch which showed that more than two million people are considering taking a payment holiday from their mortgages.

According to uSwitch, this could make monthly repayments go £54 million higher and add £7.2 billion to total interest.

"If you are taking this holiday for a month or a year, what you'll end up with is a bigger interest bill at the end of the period which will be added on to your loan so you'll end up paying for it eventually," he explained.

He also warned that under the government's Homeowner Mortgage Support Scheme, aimed at people facing repossession, interest will still be accrued even though payment of it can be deferred.