Household finances have been one of the hardest-hit areas in terms of the economic impact of COVID-19. As employers struggle to cope with the fallout of not one, but two nationwide lockdowns, several workers have been placed on furlough, or worse, made redundant, putting even more pressure on households to survive at a fraction of their standard earning capacity during the pandemic.
The government has introduced several support measures aimed towards helping people get through these challenging times. Here, we have compiled a list of resources that can help you if you’re struggling to pay your bills.
Support for mortgage payments
When it comes to household bills, mortgages are generally the most significant expense.
The Financial Conduct Authority (FCA) had introduced a mortgage holiday earlier this year, under which borrowers affected by COVID-19 can defer their repayments by six months. The deadline to apply was 31st October 2020. Since the beginning of the pandemic, over 2.5 million people have availed themselves of this scheme.
Given the second lockdown, the FCA recently proposed the deadline be extended until 31st January 2021 for those who have not yet availed themselves of the mortgage holiday. A new application would allow borrowers to defer repayments for up to six months, while an existing one could be extended to last for up to six months in total.
While the proposal is yet to be confirmed by the FCA, borrowers unable to make repayments in the meanwhile can request tailored support from their lenders. However, this may show up on the borrower’s credit record.
Though the mortgage holiday offers temporary respite to borrowers, it is essential to remember that the full amount will eventually need to be repaid once payments resume, along with any accrued interest.
Can my home be repossessed?
As per the FCA’s plans, there will be no home repossessions before 31st January 2021, unless specifically asked for by the homeowner.
This applies to all borrowers at risk of repossession, whether or not their income is affected by COVID-19. Additionally, this will not show up on your credit record, and will not affect future borrowing.
What if I’m a tenant (renting a home)?
The best option for tenants is to speak to their landlords and agree upon a scheme for repayment. It would be in the landlords' best interest to come to an agreement since eviction is a lengthy and complicated process.
Irrespective of this, bailiffs will not be used to enforce evictions before 11th January 2021, except in the most serious of cases. Courts will remain open to hear eviction cases during this time.
Other resources can help pay the rent – for example, payments through the Universal Credit scheme, or aid from hardship funds.
What about credit card and loan debt?
Like mortgage payments, the FCA has proposed an extension of the payment deferrals scheme that was introduced during the first lockdown. Around 2 million people had made use of the payment holidays for credit card and loan debt earlier this year.
Under the new proposal, new credit borrowers can defer payments for up to six months, with a proposed extension for people who have not yet reached the six-month limit. This would apply to credit cards, loans, motor finance, pawnbroking, as well as buy-now-pay-later products.
In case you have already availed yourself of the six-month deferral limit, you can request your lender for tailored support. However, this will be added to your credit record.
Other types of expenses:
Some other types of support are available for:
- Payday loans: Payday loan customers who have not yet availed themselves of a payment deferral may request up to a month-long payment holiday.
- Overdraft facilities: Until the end of October, borrowers could borrow up to £500 of overdraft interest-free. However, this is not going to be extended, and typical interest rates of around 40% will now apply to overdraft facilities.
- Energy bills: Thus far, customers unable to make energy payments have been offered customised help from their energy providers. Ofgem plans to introduce regulated support measures from 15th December that will help customers access realistic and sustainable repayment plans.
- Car insurance: Customers facing issues with repayment can contact their insurers to have their risk reassessed to access cheaper policies, reduce charges, or be given extended repayment deadlines.
- Council tax and parking: Councils have a designated hardship fund aimed towards supporting individuals who are struggling to make payments.
Additional informational resources
Free advice and guidance can be found on multiple resources, such as: