Mortgage holidays can offer valuable breathing space, but those taking one need to understand the true cost, a leading mortgage expert has warned.
A payment holiday is an agreement with a lender to pause or reduce mortgage payments for a limited period. It can ease pressure when money is tight, though the debt itself is deferred rather than written off.
The latest UK Finance figures show that 79,110 homeowner mortgages were in arrears of at least 2.5% of the outstanding balance in the first quarter of 2026, down 2% on the previous quarter, while 1,250 mortgaged homes were taken into possession, 3% more than at the end of 2025.
Mr Fox said those figures show why borrowers should feel confident reaching out to their lender as soon as their finances start to wobble, rather than waiting until a payment is missed.
“For many homeowners, a payment holiday is absolutely worth it, and it can make a real difference at the right moment,” he said. “The key is understanding that it works best for temporary situations. If you know your income is going to recover, it can be a really effective bridge. Where it’s worth pausing for thought is if the change to your finances looks more long-term, in which case it’s worth exploring the full range of options with your lender.”
When does a mortgage holiday make sense?
A payment holiday tends to make most sense when the problem is short-lived and the borrower has a clear sense of when their income will recover, Mr Fox said, such as being between jobs with a new role confirmed, taking maternity or adoption leave, waiting for delayed self-employed income, or dealing with a short period of illness.
Not every mortgage allows a holiday, with approval depending on the lender, mortgage terms, payment history and wider finances. MoneyHelper notes that some lenders may also require an overpayment reserve before agreeing to one.
Understanding the cost
To help borrowers understand the numbers involved, Mr Fox pointed to a homeowner with a £200,000 repayment mortgage over 25 years at 4.5%, whose monthly payment would be around £1,112. If they paused payments for three months and the interest was added to the mortgage, the balance would rise to roughly £202,258. If the rate and original end date stayed the same, the monthly payment would then increase to about £1,130, around £19 more a month, adding roughly £2,221 over the remaining term.
“These numbers aren’t there to put anyone off, they’re there so you can make an informed decision,” Mr Fox said. “The exact cost will depend on your balance, rate, remaining term and how the lender recovers the missed payments. Some may extend the term, others may increase the monthly payment. It’s always worth asking for the figures in pounds and pence so you know exactly what you’re agreeing to.”
Credit files and other options
Mr Fox also had reassuring news on credit files, confirming that simply speaking to a lender will not damage a borrower’s credit record. A formal payment holiday or reduced-payment arrangement may be recorded and could be a factor in future borrowing, so it’s worth asking your lender how it will appear. He added that it’s worth checking current options directly, since the rules that applied during the pandemic no longer do, applications for coronavirus payment deferrals closed on 31 March 2021, and all deferrals under that scheme ended by 31 July 2021.
There’s also a helpful option for some borrowers under the Government’s Mortgage Charter, Mr Fox said. Eligible borrowers who are up to date on payments and whose lender has signed the Charter can, on a one-off basis, switch to interest-only payments for six months or extend their mortgage term without a new affordability assessment or an immediate hit to their credit score. This doesn’t extend to buy-to-let mortgages, and it’s worth being aware it can still increase the total cost of borrowing.
“The best time to speak to your lender is the moment you sense things might get tight, not after a payment has already been missed,” Mr Fox said. “Lenders want to help, and they have a genuine range of options available, a payment holiday, reduced payments, a temporary interest-only arrangement, a longer term, or another form of tailored support. The right one depends on your situation and what you can realistically afford.
“My advice is simply to ask plenty of questions before agreeing to anything, how much it will cost, whether your monthly payment will change, whether the term will change, and how it will appear on your credit file. Used well, a mortgage holiday can be a really valuable tool when you need it most.”