A guide to your finances during coronavirus
Whilst the primary concern right now is health, financial wellbeing is important. As the country heads into its second national lockdown people are feeling the same uncertainty they did back in March.
Our coronavirus finance guide is here to help you navigate this challenging time, signposting all the ways you can get help from the government.
This scheme from the first wave of coronavirus has been due to come to an end on Saturday, however, it’s now been extended for up to six months.
A study by one of our charity partners last week, the Joseph Rowntree Foundation, found that 1.6 million households were worried about paying their mortgage over the next three months. So an extension on mortgage holiday payments will be welcomed across the country.
What are the new stipulations?
Borrowers who have not yet had a mortgage holiday can request a pause in payments from their lender that can last up to six months.
On the other hand, those who have had their payments deferred already, can extend their mortgage holiday until they reach the six-month limit.
If you have already reached the maximum six-month mortgage holiday the FCA are advising you speak to your lender about a tailored support plan.
The nitty-gritty on mortgage holiday payments
A mortgage holiday gives customers a temporary break from having to make mortgage payments during the 6 month period. Don’t forget that you will still be charged interest for the time you’re not making payments which will be added to the total cost of your mortgage.
As it’s just a holiday the payments you ‘miss’ will be spread over the rest of your future monthly payments. If you didn’t want to do this you could extend your mortgage term, adding 3 months onto your term.
If you struggle to pay the rent during the second national lockdown you should speak to your landlord about a repayment plan. However, like back in March there is no set legislation in place which protects tenants, the government guidance is “encouraging tenants and landlords to work together to put in place a rent payment scheme”.
Loans and credit cards
Back in March The FCA (Financial Conduct Authority) brought in help for credit card and loan customers, insisting that lenders need to offer payment holidays where customers were struggling to pay. Ahead of the new November lockdown, the FCA has proposed to extend loan payment holidays for those who haven’t yet had one, or who are currently on their first payment holiday.
Don’t contact your lender just yet until these proposals hopefully become a reality. One thing to note is, like mortgage payment holidays, if you have already had six months of payment holidays you won’t benefit from the new proposals.
Similar to mortgage payment holidays, if you’ve already used the 6 months of support offered from the government when it comes to loan repayments your lender might be able to provide tailored help. There are no set solutions but here are two ways they might be able to support you:
Reducing or waiving interest
If you can’t make your payments, your lender should make sure the amount of interest you owe isn’t rising out of control.
A personal payment plan
Your lender can work with you to set up a new payment plan that allows you to pay off the debt in a new timescale.
Savings and Investment
Savings rates have been plummeting since the summer. Although there’s not much we can do about that the Government and the banks have put in some specific help if you need to get access to any savings locked away in Lifetime ISA’s or fixed rate accounts for instance.
In pre-covid times you’d have to pay a penalty to get cash out of fixed-rate savings accounts if you needed it before the term was up. But during the pandemic 10 banks have waived the fee.
On May 1st the Treasury announced that people would be able to withdraw their cash from Lifetime ISAs without having to pay the full withdrawal charge. Usually, you’re charged 25% but that’s been cut to 20% for withdrawals made up to 5th April 2021.
If you have a prepaid meter, the government and energy suppliers have agreed to new emergency measures to help. Including posting cards with emergency credit to those who are self-isolating, adding discretionary credit to your meter, and allowing you to nominate someone to top up for you. Ofgem has also written to all energy suppliers urging them to “take proactive measures to support prepayment meter customers, including customers in vulnerable circumstances.”
The Local Government Association has confirmed that local authorities have help in place to support people who are facing hardship due to coronavirus.
With interest rates of overdrafts recently rising to 40% earlier this year, there was huge scope for these to be extremely dangerous in the pandemic.
Temporary FCA rules brought into effect in April meant no one would pay more than they did under their pre-April regime. But the FCA then dropped this requirement in July and all current- account providers have gone back to their standard rates.
But if you need further help because of Coronavirus there is still some help as the FCA state banks need to provide “tailored support” which could mean waiving or reducing interest, transferring debt to a cheaper credit product or agreeing to reduce overdraft limit.
Don’t forget to look after yourself
We’re living through truly unprecedented times so as well as taking stock of your finances make sure to look after your mental and physical wellbeing.