British banks and regulators are discussing the possibility of extending relief measures for covid-hit customers until the end of September.

The talks involve major banks and the Financial Conduct Authority (FCA), and aim to offer further reprieve to distressed credit card and personal loan borrowers.

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To date, lenders have granted about 1.5 million payment holidays on credit cards and personal loans. Some 877,800 borrowers have taken a payment freeze on their credit card.

Growing financial distress

With the pandemic continuing to wreak havoc on personal finance, the government has given the option of a three-month repayment holiday to mortgage holders. Since March about 1.8 million homeowners have taken advantage of this payment suspension.

As the exemption period nears it end, the available data show that people are experiencing growing difficulty in making their credit card and mortgage payments. The number of credit card holders seeking payment relief has gone up by more than a quarter since the first three weeks of May.

Postponing an unavoidable problem

Last week the government announced a three-month extension of the mortgage holiday. Banks are not too keen on the blanket exemption. It means that interest will normally continue to be charged and rolled up to paid at the end of the exemption period.

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Lenders view this as a postponement of a problem, and are encouraging anyone who can afford it to pay their debt now.

Banks are looking at other ways to work with customers worried about their ability to resume payments. Meanwhile, for customers who need support now, the payment holiday can be extended.

UK Finance, the trade body that represents the industry, is also in talks with regulators and credit rating agencies about ensuring that extensions to payment holidays and other measures to help customers do not hit the creditworthiness of borrowers.