Covid-19 and your Personal Finances

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The government’s financial regulator, the Financial Conduct Authority (FCA), and some of the UK’s biggest banks announced  a range of measures to help customers who face financial difficulties if they’re affected by the coronavirus pandemic. 

The FCA which earlier instructed banks to offer customers affected by the crisis credit card and loan payment holidays as well as overdraft interest freezes for three months, has now turned towards helping motor finance and high-cost credit borrowers. 

This comes on top of new measures including three-month mortgage payment holidays for homeowners and landlords, and some banks allowing savers to access money held in fixed-term accounts early without penalty.

Mortgage Payment Holiday

A mortgage payment holiday is when your monthly mortgage repayments are paused for a set period of time. Under the government’s policy, you can apply for a payment holiday of up to three months.

All homeowners who are up to date on their mortgage payments will qualify. They’re also available to buy-to-let landlords whose tenants have been financially affected by the coronavirus. However, landlords who take payment holidays are expected to pass on this relief to their tenants. 

Homeowners who are in arrears on their mortgage should contact their lender, who will review any changes to their circumstances and discuss their options. The Financial Conduct Authority (FCA) guidance urges mortgage lenders to not consider repossessing properties unless they can ‘demonstrate clearly that the customer has agreed it is in their best interest’.

You don’t need to have contracted or have been tested positive for the coronavirus to apply for a payment holiday. Payment holidays are available to any homeowners who are concerned about their ability to meet their mortgage repayments, for example due to a loss of work or other changes in their circumstances.

Interest will continue to accrue on the outstanding capital, which means it will take you longer and cost you a little more to clear your mortgage. With this in mind, homeowners who aren’t concerned about their ability to pay should continue with their repayments as normal. FCA guidelines state that lenders shouldn’t charge any additional fees to set up a payment holiday.

Your lender will not require you to provide any documentation or undergo any affordability tests. Instead, homeowners will need to self-certify that their income has been directly or indirectly affected by the coronavirus. If you’re a landlord, you’ll need to self-certify that your tenant’s income has been affected by the pandemic.

After three months, your lender will contact you to assess your circumstances and agree on a manageable way for you to make up the deferred payments. Lenders will provide a range of options, which may include extending your mortgage term or altering your monthly payments if it’s affordable to do so.

The credit reference agencies Experian, Equifax and TransUnion have confirmed that homeowners will have their credit scores protected when they take out a mortgage payment holiday. The agencies have collectively introduced a special measure called an ’emergency payment freeze’. This will mean credit scores will be maintained at their current level for the duration of the payment holiday.

Early Access to money in savings accounts without penalty

A number of banks have relaxed their rules on accessing the money in fixed savings accounts to help people with their cash flow during the crisis.

These include:

Barclays

First Direct

HSBC

Lloyds Banking Group (Lloyds / Bank of Scotland / Halifax)

Nationwide

Royal Bank of Scotland (NatWest / Royal Bank of Scotland / Ulster Bank)

Santander

TSB (only in respect of fixed ISAs and fixed bonds)

Motor finance and high-cost credit relief

The FCA has confirmed further measures for motor finance and high-cost credit customers.

It has stated that car finance firms should provide a three-month payment freeze for those who are having temporary difficulties meeting finance or leasing payments on a vehicle and has said firms should not make ‘unfair’ changes to customer contracts. If customers are experiencing temporary financial difficulties due to coronavirus, car finance firms should not take steps to end the agreement or repossess the vehicle.

Payday loan firms are being instructed to offer a one-month interest-free payment freeze to those who have been financially impacted by the coronavirus outbreak, along with three-month payment freezes for those signed up to pawnbroking, rent to own (RTO) and buy now, pay later (BNPL) agreements. If you are accepted for a payment deferral, this will not affect your credit rating during the period of the deferral. However, you should not stop payments until the deferral is agreed. If you stop payments before this, then it might be treated as a missed payment, incur charges and affect your credit rating. You can request a payment deferral at any point up until 27 July 2020 even if this means the payment deferral taking place after this date.

Fund suspensions 

The coronavirus pandemic has also seen 18 major UK property fund suspensions take place so far, with a total of £22.4bn trapped in various funds

Financial Conduct Authority (FCA) rules require property fund managers to consider suspending funds during extreme market conditions. Reports suggest managers want to protect customers by ensuring that they don’t make payments at a time when they’re unsure of the value of their underlying assets. 

The table below shows which property funds have been suspended and how much they’re worth

FundFund size
Aberdeen UK Property (Standard Life)£1.1bn
Aberdeen UK Real Estate (Standard Life)£1.7bn
Aviva Investors UK Property£442m
Janus Henderson UK PAIF£2bn
Kames Property Income£501m
M&G Property Portfolio£2.3bn
Standard Life Investments UK Real Estate Platform£1.7bn
L&G UK Property Fund£3bn
ASI Global Real Estate Fund£550m
Columbia Threadneedle UK Property Authorised Investment Fund£1.1bn
BMO Property Growth and Income Fund£502m
St. James’s Place Property£1bn
St. James’s Place Property Life£200m
St. James’s Place Property Pension£1.2bn
Royal London Property Fund£404m
Royal London Property Trust£408m
BlackRock UK Property£3.4bn
Schroder UK Real Estate£2.4bn

Source: FE data showing suspended property fund sizes. 

If you’re invested in such funds, there’s not a whole lot you can do apart from sitting tight and looking for information and updates on your fund provider’s website.

Making decisions about your savings and investments based on short-term events and circumstances can have long-term consequences for your financial wellbeing and retirement. Before making any major decisions about your savings and investments, it is important to get independent guidance or advice from an Independent Financial Advisor.

SRC-Time are one of the South East’s leading accountancy firms in advising individuals and businesses in all aspects of their accounting and tax affairs and we are able to assist in any issue raised above.

Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at info@src-time.co.uk  or speak with an account manager to get any process started.

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