If you’re facing a sharp drop in your income due to the coronavirus crisis, it’s vital to look at ways you might be able to ease some of the financial pressure.
Several measures have been introduced to help those who are finding it difficult to keep up with their bills. Much of this help takes the form of payment holidays, where your monthly payments are paused temporarily. Whilst this can provide a valuable lifeline in the short term, it’s important to remember there are costs attached and your bills may be higher when payment holidays end.
Here’s our rundown of some of the ways you might be able to get help.
If you think you’re not going to be able to afford to pay your mortgage, contact your lender as soon as possible to discuss the options that might be available to you.
For example, you could consider taking a mortgage payment holiday to give yourself a bit of financial breathing space. Bear in mind, however, that you are simply deferring these payments so that when you start paying for your mortgage again, your monthly payments will be slightly higher. It’s also important to understand that even though a mortgage payment holiday shouldn’t impact your credit score, it could make it harder for you to remortgage in future. You can find out what taking a mortgage payment holiday will mean for your future repayments with our mortgage payment holiday calculator. Read more about how mortgage payment holidays work in our article Everything you need to know about taking a mortgage payment holiday.
Lenders must allow homeowners who haven’t already taken a payment holiday to apply for one up until October 31. Anyone applying in October won’t have to restart their payments until January 2021.
There may be other options available which could help make your monthly payments more manageable. You might be able to move your mortgage from a repayment to an interest-only basis, although you’ll need to be able to demonstrate to your lender that you’ve got a plan in place to pay back the capital you owe at the end of your mortgage term. Alternatively, if you’re not tied into your current mortgage deal, you could think about remortgaging to a cheaper rate to reduce your monthly payments. Many lenders have reduced the maximum amount they will lend during the coronavirus crisis, so you’ll typically only be able to borrow up to 75% of your property’s value, although some have restricted this to 60%.
A fee-free mortgage brokers should be able to advise on the best remortgage deals which you’ll be eligible for. We’ve chosen to partner with Fluent Mortgages to offer free, expert mortgage advice. If you’d like to speak to someone, arrange a callback here.
If you’re renting, let your landlord know as soon as possible if you’re not going to be able to pay your rent. They may be able to negotiate a buy-to-let mortgage payment holiday with their lender or work out a way you can temporarily reduce your payments. Landlords can’t start eviction proceedings against tenants until they have missed more than three months of rent payments, so even if yours is unsympathetic, they can’t ask you to leave straight away. The charity Shelter has plenty of useful information and housing advice for those financially impacted by coronavirus.
Banks are currently charging 0% interest on the first £500 of agreed overdrafts, to support those affected by coronavirus. Initially this support was available for three months from April, but the Financial Conduct Authority (FCA) has said banks should continue to help those who are unable to repay what they owe. If you don’t already have an agreed overdraft, you can request one from your bank. Customers yet to request an arranged interest-free overdraft of up to £500, will have until 31 October 2020 to apply for one.
Many banks had planned to hike their overdraft charges at the start of the tax year on 6 April, but the FCA has said that no-one should now pay more than they used to.
Credit cards and personal loans
You can request a payment holiday if you have a credit card or personal loan. When the pandemic started, these were offered for up to three months, but payment breaks have now been extended to six months.
Customers yet to request a payment freeze have until 31 October 2020 to apply for one.
You won’t need to make any repayments during this period, but banks can still charge you interest during the payment holiday. This will be added to your balance so that when you start paying back what you owe, it will cost you more and take you longer to clear your debt.
Several credit card providers, including Nationwide, HSBC and First Direct have said they will also waive fees for missed payments and offer emergency credit limit increases if necessary. Similarly, loan providers including Halifax, Lloyds and Santander are offering payment holidays to loan customers.
If you think you’re going to need a payment holiday, get in touch with your credit card or loan provider as soon as possible. Some have online forms which you can submit so you don’t have to wait on the phone to speak to someone. It’s important to request a payment holiday in advance, rather than simply not making a payment. Taking a payment holiday shouldn’t affect your credit rating, whereas simply missing a payment will count against your credit score and could incur further charges.
If you don’t think you’re going to be able to afford to pay your energy bills over the next few months, contact your energy provider and see if they can defer your payments temporarily. Most of the big suppliers, such as British Gas, Npower, EDF and E.on have said that they will delay bill due dates, and EDF Energy, Npower, Scottish Power, and a few other providers have confirmed they will allow energy customers who are struggling financially, to repay what they owe over longer periods. However, suppliers can now pursue customers over unpaid bills, although the energy regulator Ofgem has urged them not to use aggressive tactics.
You should also check your tariff as you may be able to reduce your bills by switching to a cheaper deal. The best tariff for you will depend on where you live and how much energy you use. You can use our free energy switching service to see how much you can save. It typically takes just 5 minutes and savings can run into hundreds of pounds – for the same energy, through the same pipes and wires.
If you have a pre-payment meter and are unable to top it up either because you are ill with coronavirus or have to self-isolate you may be able to get a top-up card or key with credit on it posted at your home. Get in touch with your supplier as soon as possible so that they can send one out to you.
Most water companies are offering support to customers who are having problems paying their water bills.
Options may include moving to a capped tariff where your payments won’t exceed a certain amount, taking a break from payments until you’re able to get back on track, or your provider might agree to lower your bills temporarily.
What you’ll be offered will depend on your individual situation, so get in touch with your supplier to see what help they can provide you with.
If you don’t think you’ll be able to afford to pay your council tax because you’re now on a lower income or claiming benefits, you might be eligible for a council tax reduction which could reduce your bill by up to 100%. What you get will depend on where you live, your circumstances, your household income and whether you have children or other dependents living with you. You can apply for a council tax reduction here.
If you don’t qualify for a reduction, you may still be able to ask your council whether you might be able to take a break from payments for a month or two. The support available varies from council to council so it’s worth contacting your local council to find out what help they can provide – you can find their contact details here.
Help if you have to self-isolate
People on low incomes who need to self-isolate and are unable to work from home in areas with high incidence of COVID-19 will benefit from a new payment scheme beginning on 1 September.
The scheme will start with a trial in Blackburn with Darwen, Pendle and Oldham to ensure the process works before it is rolled out more widely. If you’re eligible and test positive with the virus you’ll receive £130 for your 10-day period of self-isolation. Other members of your household who have to self-isolate for 14 days will be entitled to a payment of £182.
Contacts who don’t live with you and who are advised to self-isolate through NHS Test and Trace will also be entitled to a payment of up to £182. Find out more here.
Seek professional help if you’re struggling
As well as asking for support on your regular bills, it’s a good idea to look at other ways you might be able to reduce your outgoings. Hopefully our article 17 ways to cut costs might have some useful ideas.
If you’re finding it impossible to manage your finances during this difficult time and are worried about your debts spiralling out of control, it’s important to get professional help as soon as possible. Charities StepChange, National Debtline and the Debt Advice Foundation all offer free debt advice and may be able to help you arrive at a manageable repayment plan with your creditors. The sooner you act, the better your chances of finding a workable solution so don’t be ashamed about speaking to someone during these times of crisis.