It is a tricky one. Many comments made by people reveal a lack of understanding about mortgage payments, about being a Landlord being a business and also that tenants are people struggling with Covid like everyone else.
Like most things, I think this mostly comes down to good and clear communication and that all agreements are in writing. If I were Op, I would be clearer in my mind that taking a mortgage holiday IS going to cost me....it might not be costing me right now, but it will be added to the balance and accrue interest, so over time, this mortgage holiday will cost me more than if I had paid the mortgage as usual now. Because of that, she is right that she is 'subbing' them.
The fact that the Landlord is probably richer and probably owns at least 2 properties, whilst the tenant is probably poorer and probably owns none, isn't particularly a factor in deciding what is right to do in this scenario. No other business says, that because the business owner is richer, poorer customers should get the products they sell cheaper or for free. Tenants are not 'paying the landlords mortgage' - they are paying rent for receiving the benefits of living in a property. It is entirely up to the Landlord what they do with that money...it could go on holidays, charity, updating the property, a yacht, the mortgage on one of many properties, or their council tax......in the same way earnings from any business can go on anything the recipient chooses to spend them on.
In this situation, I would have been flexible with tenants. A very small, short-term and clearly defined term discount, I might have written off. For anything larger or more long term (or becoming lomg term) I would have npbeen making clear that my mortgage had paused but the payments plus further interest would still be due, so it would be a rent holiday with a repayment plan for them......shorter repayment term than on my mortgage, but basically similar principle.
At the current time, LLs need to accept lots if tenants are struggling and lots are going to lose their jobs in the next few months. In lots of sectors of the rental market, especially those where tenants tend to work in retail and hospitality, market rents might drop anyway as large was antithesis tenants lose their jobs. It ight be very hard to find tenants who will pay the current rent levels. We all know that empty or void periods, even if just a month or 2 can wipe out any profit which is made from property. It usually is better to keep a reliable tenant who lays a bit less than to take the risk of having a void period and then possibly a lower rent from an unknown tenant, who is equally likely to face employment issues in a few months.
So, here I probably wouldn't give notice. I probably would be speaking to the tenant and explaining that their lower rent IS costing me and from the 6 month point, a repayment plan will be needed, so they are having a rent pause not a holiday. If they don't feel able to agree to that, then I would seriously consider giving them notice. I would have to decide if into the long term (bearing in mind more mortgage over the longer term) if I could suck up the loss and if the rent they would pay,mwoukdnwouldnt cover my costs and be better than the risks of void periods or problem tenants. It might still be better to keep them.