PAYMENT HOLIDAYS: THE GOOD, THE BAD AND THE UGLY

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PAYMENT HOLIDAYS : THE GOOD, THE BAD AND THE UGLY

  • Akbar Ali
  • Published: 16 July 2020


One of the new norms of the COVID-19 environment has been the state sanctioned use of payment holidays to provide consumers with immediate financial relief. Initially intended to run for just three months, these will now be available until October 2020. Some customers will have taken advantage of six months’ worth of payment holidays before they contemplate resuming mortgage payments.

However, payment holidays have a hidden cost to the consumer. In many cases, for a customer at risk of hardship in normal circumstances, a bank would not necessarily see a payment holiday as a good solution to meeting the needs of customers on the cusp of financial hardship. In this paper, we look at the economic impact of payment holidays, how banks have responded, and the steps they can take today to mitigate the size of potential remediation pay-outs in the future. 

 
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