Our focus is helping our customers, the wider community and our people through the Coronavirus outbreak and beyond.
While your health and welfare are top priorities, you may also be really concerned about how this challenging time might affect your finances and your ability to manage them. That’s why we want to offer some guidance and keep you updated and informed on the ongoing changes.
What should I know?
The Chancellor announced on 17 March that mortgage lenders have agreed to provide a three-month payment holiday to affected customers who get in touch. This means that if you can’t pay your mortgage as a result of Coronavirus, you can speak to your lender about taking a temporary break in your mortgage payments.
If you decide to take a payment holiday, after three months, your lender will review your circumstances and agree with you how to make up the deferred payments. Interest will still be charged for the duration of your payment holiday so this could mean an increase in your future monthly mortgage payments, or an extension to your mortgage term.
UK Finance, the trade association for the UK banking industry, has confirmed that people who have taken a mortgage payment holiday will still be able to move over to a new mortgage deal with their lender.
On 22 May, the Financial Conduct Authority (FCA) announced that lenders should continue to support customers who are struggling to pay their mortgage due to Coronavirus. This means that if you have not yet agreed a mortgage payment holiday with your lender, you now have until 31 October to request one. If you are already on a mortgage payment holiday, your lender should contact you at the end of the holiday to find out if you can afford to resume payments. If you are still struggling to afford repayments, your lender could extend the holiday by a further three months.
Other forms of credit
On 9 April, the FCA confirmed that they are expecting banks and lenders to offer even more financial assistance to customers at this time. This includes a temporary payment holiday for loans and credit cards (as well as mortgages) for up to three months.
On the 24 April, the FCA confirmed that customers can apply for three-month payment holidays on other forms of credit, including car, van and bike finance, buy-now pay-later, rent-to-own and pawnbroking agreements. For high-cost short-term credit (including payday loans), you can apply to have payments frozen for one month with no additional interest charged.
If you are coming to the end of a three-month payment holiday on car finance, buy-now pay-later (BNPL) or rent-to-own (RTO) and you are still struggling financially, you can apply to make reduced payments or extend the payment holiday for a further three months. For customers yet to request a payment freeze, the deadline to apply for one has been extended to 31 October.
On 18 May the FCA introduced new measures to support insurance customers. This means insurers will have to reassess the risk of providing insurance to you, and lower your premiums if the risk is now lower. They will also need to assess whether you still need any ‘add-ons’ (e.g. replacement vehicle cover) that are on your policy, and, if not, remove them and reduce your premiums accordingly.
If you pay for your insurance by monthly instalments and are still struggling to make your payments after your cover has been reassessed, insurers will be expected to offer a payment holiday of up to three months. You’ll only be eligible for a payment holiday if your financial difficulties were caused by the Coronavirus outbreak.
These measures apply to car, van and motorbike insurance, home insurance, travel insurance, boiler cover, income protection insurance, critical illness cover, life insurance, private medical insurance and premium credit providers. Insurers must waive cancellation fees if you wish to cancel a policy and waive admin fees if you request to change their level of cover.
Payment holiday application deadlines
Mortgages, credit cards, personal loans, catalogue debt, or an arranged interest-free overdraft up to £500 on your main current account, car finance, buy-now-pay-later, rent-to-own and payday loans - 31 October.
Insurance (car, home, loan ect.) - 18 August.
If you’re already on an agreed payment holiday, you could extend it for a further three months or arrange to make partial payments for the next three months. If you’ve already arranged an overdraft on your current account, you can request up to £500 interest-free for a further three months.
Many of the big banks had offered their customers an automatic interest-free overdraft of up to £500 during the pandemic. For most banks, this arrangement came to an end during July. If you’re struggling with your finances due to the impact of Coronavirus, you can still contact your bank to request a 0% overdraft and ask to not be charged 40% on your spending over the agreed 0% limit.
Payment holidays and your credit score
We’ve been working with the Government and the financial services industry to help protect your finances at this difficult time. As a result, agreeing with lenders to pause your payments for a while should not result in missed payments building up on your credit report - which should generally mean your credit score won’t be damaged.
Household utility firms (for example water and energy suppliers) are taking differing approaches to how they support consumers at this time, which may result in changes to how they update your credit report. Where you agree a payment freeze with them, you should ask the company how they will show this on your credit report.
Payment holidays and your mortgage application
Lenders don’t just use credit reports and credit scores to assess your creditworthiness when you apply for a mortgage. They also use information from your application form, and sometimes your bank account, to consider whether you can afford the new payments. If you’ve taken a recent payment holiday, some lenders may look at your application more carefully.
If you’ve recently taken an agreed payment holiday and are about to apply for a mortgage, it’s important to speak to lenders directly before you apply. Ask them whether your agreed payment holiday might affect your application.
The Chancellor's summer statement
The Chancellor delivered his summer statement on 8 July outlining plans to protect, create and support employment, and further measures to help you through this challenging time. Here’s our roundup of the points that are likely to matter to you most.
Furlough scheme – the plan is to wind this down flexibly and gradually until the end of October. A jobs retention bonus will be introduced to help phase out the scheme. Businesses will be paid £1000 per furloughed employee they keep on.
Kickstart scheme – to encourage employers to take on new young employees, the government will pay their wages for 6 months.
Green homes scheme – you could benefit from a potential saving of up to £300 a year by applying for vouchers to insulate your home.
Stamp duty – to get the housing market moving again, stamp duty will be cut with immediate effect until 31 March 2021 and the threshold will increase from £125,000 to £500,000. If you’re hoping to move, this means you may not need to pay any stamp duty at all, substantially reducing moving costs.
Eat Out to Help Out vouchers – enjoy discounted dinners during the kids’ summer hols. For the month of August, the government will be providing a discount of up to £10 a head per person Monday to Wednesday for participating restaurants (this includes children’s meals but not booze).
Taking out credit in the current climate
If you’re considering borrowing money either through a credit card, loan or overdraft, to help you cope during the Coronavirus outbreak, make sure you don’t borrow more than you can afford to repay, to avoid facing the additional pressure of meeting monthly repayments your income won’t stretch to cover.
You may also find it useful to read the workers’ support package that was recently announced by the Chancellor, including changes to Universal Credit and Statutory Sick Pay. You can find more information on that here.
On 4 May the Government launched Bounce Back Loans for small businesses. This means thousands of small firms and sole traders will be eligible to apply for these easy-to-access loans and borrow between £2,000 and £50,000. The cash will arrive within days and application is via a short and simple online form.
If the situation worsens, or goes on for a long period of time, it may become harder to find and be accepted for credit offers. So if you’re thinking about applying for credit it would be a good idea to start reviewing your options sooner rather than later.
If you’ve recently been furloughed or made redundant, or you’re self-employed and facing a reduction in income, you could now be eligible for Universal Credit to help you meet your basic living costs. You can find more information on that here.
It’s simple to make an online application for Universal Credit, and means you can avoid the extremely busy phone lines. You may receive a call after you’ve completed your online application to verify your details.
From 27 March, all ongoing possession proceedings are suspended for 90 days with an option to extend the suspension further. That means banks and building societies have been forbidden from repossessing people’s homes, and cannot charge fees for payment holidays agreed in the wake of the outbreak.
If you’re struggling to pay your rent due to the outbreak, speak to your landlord as soon as possible to let them know your situation and try to work out a repayment plan.
You should know that all landlords in England and Wales must give three months’ notice before starting eviction proceedings according to emergency legislation that was passed on 25 March.
You could also be entitled to financial help with your rent. You can check the assistance being offered by the government for renters during the outbreak here.
Government assistance for the self-employed unable to work due to the outbreak
It was announced on 27 March that self-employed workers will be able to apply for a grant worth 80% of your average monthly profits (based on your tax returns over the past three years) to help you cope with the financial impact of Coronavirus.
You can read more on government assistance here.
Updated guidance on being furloughed
The Coronavirus Job Retention Scheme allows firms to temporarily freeze employment for those who can’t work due to the outbreak. For the duration of the employment freeze, the government will pay 80% of furloughed staff’s salary - up to £2,500 per month. On 12 May the government extended the furloughing scheme to last until the end of October.
Firms can rehire and furlough staff who left their employment after 28 February 2020. This is applicable whether you lost your job as a result of the outbreak or if you left voluntarily.
In order to help new starters, the government has now changed the employee cut-off date for the furlough scheme to 19 March 2020. So if you joined a new company and were added to payroll before 19 March, you’ll be eligible for the furlough scheme.
If your employer is offering you unpaid leave or redundancy because they can’t afford to put you on furlough, you can ask them to consider offering you delayed pay. It’s a matter between you and your employer, and is best confirmed via a formal agreement.
On 24 April, the government confirmed that statutory maternity pay won’t be impacted by furlough. Any furloughed workers planning to take paid parental or adoption leave after 24 April will be entitled to pay based on their usual earnings rather than their furloughed pay rate.
From July onwards, claims to the government’s furlough scheme will be restricted to employers currently using the scheme and employees who were on the furlough scheme before 10 June.
On 9 June, the government announced that people currently on statutory maternity and paternity leave who will return to work in the coming months will be eligible for furlough, even after the 10 June cut-off date. This rule also applies if you are currently on adoption leave, shared parental leave or parental bereavement leave. However, you’ll only be eligible if you work for an employer that has previously furloughed employees.
Tax relief working from home
If your employer requires you to work from home during the outbreak, and that means you've had increased household bills (eg energy), you're entitled to claim something back.
You can claim tax relief on £6 of income, which for basic 20% taxpayers is £1.20 a week (about £60 per year), and £2.40 per week for 40% taxpayers (about £120 per year).
Free school meals
If your children qualify for free school meals, you should be entitled to support that ensures you receive food while your child's at home. This means you're due a food parcel or £15 per week of supermarket vouchers.
The school should be arranging this, but it may be worthwhile to check with them or your local authority. You can find more information here.
If you have a child under the age of 16 and your income has recently dropped due to redundancy or being put on furlough, you might now be entitled to claim child benefit.
Parents or primary carers are eligible to receive £21.05 a week if you have one child, or £35 a week if you have two children. The benefit is paid every four weeks and you can backdate claims for up to three months. If you or your partner earns over £50,000, you may have to pay back some of the benefit in tax.
If you have just welcomed a newborn into your family, you can now apply for child benefit without having registered your child’s birth in person. Just explain that you haven’t been able to register your baby’s birth due to Coronavirus. You can learn more here.
If you have a child at university or about to start at university this year, and your household income has dropped, let student finance know. The government’s maintenance loan to cover living costs for undergraduates is means-tested depending on household income. If your income is at least 15% lower over this year, you can complete a current year income assessment.
What can I do?
Your existing credit commitments
We know that this is a very difficult time and that many people have been severely affected by the financial impact of Coronavirus, but if you’re able to, it’s really important to pay all of your bills on time so you don’t damage your chances of getting credit in the future. If you can’t do this, try to pay at least the minimum amount due on your credit commitments.
If you think you’re going to struggle to make payments, due to the knock-on effects of the outbreak, please speak to your lender as soon as you can. You can find more details about the help that lenders are offering in our guide here.
If you’re worried you won’t be able to pay your energy, water, mobile or other monthly bills, contact your providers to see if they offer flexible payment options, such as payment breaks or reductions in bill amounts during the outbreak.
If you’re a prepayment customer and are currently self-isolating, you could benefit from the emergency measure being introduced by providers. You can find more information on that here.
If your MOT was due between 30 March and 31 July, you will have automatically got a six-month extension. This extension will not apply to you if your MOT is due on or after 1 August and you live in England, Scotland or Wales, so you’ll need to book in your MOT test as normal.
If you’re not driving as much as you usually do and your car is parked at home, the cost of insuring it should be lower. Speak to your insurer to let them know of your lower mileage or consider switching to a provider that only charges you for the distance you drive.
It’s also a good idea to compare energy prices and make sure you’re taking advantage of the best offers available.
If you’re concerned about not being able to pay your council tax bill, contact your local council as you may be eligible for a reduced council tax bill. The Government distributes a hardship fund to councils so that they can support local residents who are struggling with their finances.
Balance Transfer Cards
If you have existing credit card debt, then you could save money by transferring balances to a credit card with lower interest. A small transfer fee may apply but this may reduce your monthly repayments and can help reduce the cost of existing borrowing.
We’ve seen some lenders remove their best credit offers, so it’s a good idea to check your eligibility when applying for credit. This will help you avoid being refused credit and building up multiple credit application (hard) searches. Doing an eligibility check won’t change your credit score or appear on your credit report to lenders. Click here to check your eligibility for credit cards.
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The Bank of England base rate was cut to 0.1% on 19 March. This means that if you’re on a variable or tracker mortgage, you could see your repayment rates fall.
If you have a fixed-rate mortgage, this cut will not affect your monthly payments. However, if you’re coming to the end of your existing fixed-rate agreement, this could be a good time to search for a new offer, as mortgage rates remain at historical lows.
Protect your identity
Unfortunately, we’ve seen a rise in scammers taking advantage of the outbreak to exploit people. We want to encourage you to continue being vigilant with your personal details – particularly online. Visit our guide for more information on how you can protect yourself.
If you've received a suspicious email that looks like a scam, you can now report it to the government's official cyber security department by forwarding the email to: firstname.lastname@example.org. Find more guidance around scams that have appeared during the pandemic in our fraud guide.
The pace of news and information about the virus and its progress can seem overwhelming. As can all the information about the actions being taken by companies, governments and individuals to help us make it through. So, we’ll continue to try to help by summarising and simplifying what you need to know about money and credit, as we as a country work together to get through this.
Information correct as of 5pm 27th July 2020.