It’s no surprise that the current situation with the Coronavirus has left many people worried about their financial health. So, we thought it prudent to offer some guidance and reassurance for you and anyone concerned about it.
The Chancellor of the exchequer announced last week that mortgage lenders have agreed to a 3-month payment holiday. Meaning if you can’t pay your mortgage as a result of Covid-19, you can speak to your bank about taking a break in your scheduled mortgage payments for up to three months.
If you did decide to make the most of a payment holiday, after 3 months, your mortgage lender would review your circumstances and agree with you how best to make up the deferred payments. This may mean an increase in your future monthly mortgage payments or in many cases an extension to your mortgage term.
The Bank of England base rate was cut to 0.1% on 19th March. This means that if you’re on a variable or tracker mortgage, you will 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 will be a good time to search for a new deal, as mortgage rates are at historical lows. You can search for mortgage offers here.
If you’re considering taking out any form of credit to help you cope during the Covid-19 outbreak, it’s vital to consider all your financial options first. This means you should only borrow what you can afford to repay, and you should consider how your future income may affect the affordability of additional financial commitments. The Chancellor recently announced the workers support package. You can find more information on this here.
Barclays was the first bank to announce that payment holidays are to be offered and interest will be waivered on their overdraft.
Before looking to take out any loan we suggest you get in touch with your bank to see if you can take advantage of free overdrafts. As the situation evolves you may find borrowing options change, so if you’re thinking about applying for credit it would be prudent to start reviewing your options sooner rather than later.
If you have existing credit card debt, it would be our advice that you look to do a balance transfer. In many cases the banks will offer interest free for up to 12 months.
We’ve seeing many lenders remove their best credit offers, so it would be a good idea to compare deals first and then check your eligibility when applying for credit. Doing these checks will not have any affect on your credit score.
If you can, continue to make your credit payments, as missing payments will affect your credit score and ability to secure future finance. This is especially true if you are wanting to apply for a mortgage at any point in the next 6 years.
However, it’s reasonable to worry about how to manage your finances if there’s a possibility that your income is going to be reduced. If you think you’re going to struggle to make payments, due to knock-on effects of the outbreak, please speak to your lender as soon as you can as the majority should be offering payment holidays.
Though its not exactly business as usual, we are adapting and staying positive. We are still very much open for business. If your financial situation has changed and you are worried about making loan payments, get in touch with your Customer Care Manager or with us here.
If you are struggling due to Covid-19 there are several options to get you back on track, for example we can freeze, or reduce your payments for a while, to give you some breathing space until everything returns to normal.
For the vast majority of people, a reduced payment plan will be the best solution as you will continue to reduce your balance. If you need to freeze payments, we will add these onto the end of your loan, but you won’t be charged any incremental interest.
In both cases, because of the situation, we won’t be reporting payment freezes or payment reductions to our Credit reference agencies. So, rest assured that we won’t allow this situation to have a negative impact on your credit score.
The pace of information and news on the virus and its progress can seem overwhelming. As can all the information about the actions being taken by governments, businesses and the individuals to help us make it through. So, we’ll continue to try and help simplify and make clear what you need to know from a financial and credit perspective.
Information correct as of 10am 25th March 2020.