A mortgage holiday is an arrangement where your lender agrees to pause part or all of your payments for a set period. Also called a mortgage payment break or payment deferral.

Does it affect your credit rating?#

Yes, it can — though the confusion around this is understandable, and stems from the pandemic.

At the height of Covid, the UK government introduced a mortgage holiday scheme for homeowners affected by furlough and unemployment. It ran from March 2020 until March 2021, and lenders agreed not to penalise borrowers during that period. Payments were reported as paid on time.

Post-pandemic, lenders can once again report a mortgage holiday as payments in arrears — which can damage your credit score.

So check with your lender first. Not all will report it as missed payments, but you need to be clear on the consequences before arranging one.

Never start missing payments without an arrangement in place. That will hurt your credit score and put your home at risk.

Can it improve your score?#

Possibly, though it's not a good reason to take one.

In theory, pausing your mortgage frees up cash to pay off other debts, which could boost your score in the short term.

But your payments restart afterwards — and depending on your agreement, they could be higher than before to offset the pause. Leave yourself short and you'll miss payments, harm your rating, and put your home at risk of repossession.

How it affects your ability to borrow#

Even if it never appears on your credit report, a mortgage holiday can affect future borrowing.

When you remortgage with a new lender or apply for a personal loan, they'll check your credit report. But they won't stop there. You'll likely supply bank statements as evidence of income and outgoings — and missing mortgage payments in those statements signal a payment holiday, past or present.

Some lenders factor that in, offering less than you asked for or rejecting the application if they doubt you can keep up.

How to get one#

Most lenders have a page dedicated to payment holidays — search their name plus "payment holiday". You may be able to request one through online banking.

Otherwise:

  1. Call your lender and ask for a mortgage payment holiday.
  2. Explain your situation and why you're requesting it.
  3. Provide evidence. Some lenders ask for bank statements or payslips proving your income has dropped.
  4. Wait for their decision, based on your circumstances. The length is usually at the lender's discretion.

Who's eligible? Criteria vary. Often you need to be up to date with payments over a certain period first. Some lenders only agree if your loan-to-value is below 80%.

Calculating LTV: a property worth £200,000 with £150,000 outstanding gives an LTV of 75%.

What happens at the end? Payments restart on the usual date, but your monthly payments will be higher — making up the missed payments and covering the additional interest charged during the break.

The pros and cons#

Advantages:

  • Lifts financial stress, at least temporarily, giving you headspace to make positive changes
  • Access to more cash for paying down other debts weighing on you
  • Bridges a temporary drop in earnings, such as parental leave

Disadvantages:

  • You're still charged interest on the remaining balance, so you'll owe more when payments restart
  • Higher repayments afterwards. If your income has fallen permanently, you could end up worse off
  • It could be reported on your credit file, affecting future credit

The alternatives#

A mortgage holiday is usually a last resort, since your balance and payments both rise afterwards and your score may suffer. These options reduce your monthly payments without the same risk, provided you keep paying on time.

Remortgage to a new deal, with your current lender or another. Especially worthwhile if you can remortgage to a lower rate. Check the terms though — leaving a fixed-rate deal early can mean an Early Repayment Charge.

Extend your mortgage term, from 25 to 30 years for instance. Longer to repay means lower monthly payments, though the overall balance increases in the long run.

Switch to an interest-only deal, paying only interest each month with the balance due in full at the end of the term. To qualify you'll need to prove you can clear it with a lump sum — savings, stocks and shares, or by selling other assets.

The interest-only holiday specifically#

A common middle route is an interest-only mortgage holiday — temporarily reducing your payments by covering just the interest rather than the full repayment amount, rather than pausing payments altogether.

It lowers your monthly outgoings and keeps you from missing payments, which protects both your score and ultimately your home. But the trade-offs are real:

  • You're not reducing your debt. The principal stays untouched, so you'll be paying off the mortgage for longer.
  • It costs more overall. With the debt not shrinking, you pay more interest across the life of the mortgage. If your income has fallen permanently, you could end up worse off.
  • It's a temporary fix. If the difficulty doesn't pass, you'll need remortgaging, a term extension, downsizing or debt advice.
  • It may still be reported. Arranging one shouldn't directly harm your score, but it could appear on your file for lenders to weigh later.

Three questions worth answering honestly before you take one: is the difficulty temporary, can you resume full — possibly higher — payments afterwards, and have you explored the alternatives with a broker or adviser?

Contact your mortgage provider directly to explore any of these.

The key things to remember#

  • The Covid scheme (March 2020 to March 2021) protected credit files; that protection has ended.
  • Lenders can now report a holiday as arrears — ask yours before arranging one.
  • Never stop paying without an agreement in place.
  • Payments restart higher, covering both the pause and the extra interest.
  • Some lenders require an LTV below 80%.
  • Bank statements can reveal a holiday even when your credit report doesn't.
  • Remortgaging, extending your term or switching to interest-only are lower-risk alternatives.
  • An interest-only holiday lowers payments but leaves the principal untouched, costing more overall.