Coronavirus: what to do if you are struggling financially

Help is available for those in need

The ongoing coronavirus pandemic is putting increasing pressure on the personal finances of households across the UK. If you are struggling financially, here is our guide to the support available.

I cannot pay my mortgage this month

In March the government announced plans to let homeowners defer their mortgage repayments for at least three months. So-called ‘mortgage holidays’ let you stop paying your homeloan for a fixed period to give your finances some vital breathing space.

However, it is important to note that interest continues to build up on your mortgage, meaning the size of your remaining balance will grow. As such, it should only be used by borrowers who really need it.

Mortgage holidays are not new, but the difference is that under the new rules borrowers will be able to self-certify their income. This means the lender will no longer judge a borrower’s financial situation before making a decision on whether or not they can take a break from their mortgage.

Importantly, lenders will also liase with credit referencing companies to ensure that taking a mortgage holiday does not harm your credit score.

If you need to arrange a mortgage holiday contact your lender as soon as you become aware that you could struggle with repayments.

Do I need a mortgage holiday?

Bear in mind that many mortgage repayments are about to fall anyway, so a payment holiday might not be needed.

In March the Bank of England made two cuts to base rate, which is factored in to homeloan interest levels.

The rate fell from 0.75% to 0.1% as a result, and mortgage lenders almost always pass on this sort of cut to homeowners.

People with variable rate mortgages should see a reduction – although it may not be by the full 0.65% - while people with tracker mortgages (which move up and down in line with base rate) should get the full benefit.

Borrowers with fixed-rate mortgages, however, will not see their repayments fall until they come to remortgage.

I do not own my own home. What if I cannot pay my rent?

After the government confirmed plans to protect homeowners, it quickly became apparent that it had to support renters too.

To do this the government has now put in place emergency legislation banning any tenants being evicted from private or social rented accommodation for failing to pay their rent.

No landlords will be able to start any eviction proceedings for the next three months. After that time landlords or tenants will be expected to agree an affordable repayment plan that takes into account the individual’s specific circumstances.

Commenting on the announcement, housing secretary, Robert Jenrick MP says: “The government is clear – no renter who has lost income due to coronavirus will be forced out of their home, nor will any landlord face unmanageable debts.

“These are extraordinary times and renters and landlords alike are of course worried about paying their rent and mortgage. Which is why we are urgently introducing emergency legislation to protect tenants in social and private accommodation from an eviction process being started.”

I am a landlord, what am I supposed to do if my tenants cannot pay rent. How will I repay my mortgage?

As a part of moves to protect tenants, the government has now extended the option to take a three-month mortgage holiday to buy-to-let borrowers as well as homeowners.

Ben Beadle, chief executive of the National Residential Landlords association said: “Landlord groups welcome government support. We recognise the exceptional circumstances and we will work collaboratively with government to ensure these measures protect both landlords and tenants.”

The news is little comfort to landlords who own their property outright with no mortgage. However, their worst-case scenario would be losing out on rental income rather than defaulting on a mortgage and losing their house due to the tenant not paying rent.

What if I cannot make repayments on loans and credit cards – am I going to hit by fines or charges?

Banks are also relaxing rules for people that cannot meet repayments on personal loans or credit cards. Many are offering payment holidays, while others will waive fines for missed payments or negotiate lower monthly repayments for those that are struggling.

Halifax, for example has said it will not charge any penalties for missed payments on any of its mortgages, loans or credit cards.

Nationwide meanwhile says it will increase credit card and overdraft limits while members are on reduced incomes and offer support for members with financial difficulties by waiving interest charges on overdrafts and credit cards.

If you are worried, call your lender to discuss what options are open to you.

What else are banks doing to help customers?

Many savers will have money that they don’t feel they can touch because it is tied up in fixed-rate savings accounts. Normally these deals do not allow cash to be taken out early, or allow it in exceptional circumstances if the saver sacrifices interest.

But to free up this money to struggling savers, a range of banks including Barclays, First Direct, Lloyds, Halifax and Nationwide have agreed to let customers dip into these pots penalty free.

What about my energy bills?

Energy providers have guaranteed that more than four million vulnerable customers using pre-payment meters for gas and electricity will not have their supply cut off during the coronavirus crisis.

Customers who cannot pay should speak to their supplier as soon as they have concerns. Options include being sent a pre-loaded top-up card, adding a discretionary fund to your account credit or nominating a third party for credit top ups.

My employer has had to close for the foreseeable future. How am I going to pay the bills?

Different employers will have different approaches to paying staff during this crisis. However, to ensure that employers are not forced to lay off staff as a result, the Chancellor last week announced the launch of an unprecedented scheme.

In a move that some economists have predicted will cost £78 billion, Rishi Sunak confirmed that the government will step in to pay 80% of individual’s salaries, up to £2,500 a month.

I am self-employed and my work has dried up. What is the government doing to help me?

At the time of writing the government was coming under increasing pressure to extend support to self-employed workers too. Critics claim that forcing self-employed people to rely on universal credit, payable at a rate of £94.25 a week, while the employed get 80% of their wages covered, is discriminatory.

They warned that failure to provide a higher level of wage support could incentivise some in the gig economy, such as taxi drivers and couriers, to carry on working even if they get sick.

A recent survey from the Royal Society of Arts and Manufacturing meanwhile found that 47% of the self-employed would feel compelled to work through coronavirus.

I have the coronavirus and need to take time off work. What sick pay am I entitled to?

Different employers will have different policies regarding sick pay. While some will continue to pay staff as normal if they need to take sick leave, others will only pay statutory sick pay.  This is paid at a rate of £94.25 a week for up to 28 weeks.

Normally claimants need to have been sick for four consecutive days before they can claim statutory sick pay, however following a change of legislation on 13 March, statutory sick pay will become payable from day one.

To qualify for statutory sick pay you need to inform your employer within its deadline. If it has no deadline you must tell them within seven days.

Before the pandemic if you were off sick for seven days or more you would need to supply a ‘fit note’ (more commonly referred to as a sick note) from your GP. However in order to reduce pressures on surgeries, sufferers can now download an ‘isolation note’ from the NHS website (https://www.nhs.uk/conditions/coronavirus-covid-19/) or from the NHS 111 website (https://111.nhs.uk/covid-19).

What if I need to self-isolate but am not showing any symptoms of coronavirus?

If you need to self-isolate because somebody in your household is unwell but are not ill yourself, you will still be eligible for statutory sick pay. To claim you will need to provide your employer with a digital isolation note (see links above).

I cannot claim statutory sick pay because I am self-employed. What should I do?

Only employed workers are able to claim statutory sick pay if they are unwell or need to self-isolate, despite calls to extend it to the self-employed.

Currently if a self-employed person does contract the coronavirus or needs to self-isolate, their only recourse is to claim benefits.

The employment support allowance is payable at a rate of up to £73 a week to those that that have made sufficient national insurance contributions.

In direct response to the coronavirus outbreak the government has amended rules so that it becomes payable on the first day you become unwell, as opposed to the eighth.

Some self-employed workers may be able to claim universal credit. The standard allowance for a single person over 25 is £317.82 a month, or £395.20 for couples. Additional payments may be made if you have children. The benefit isn’t payable if you have more than £16,000 in savings.

Where can I find out more support about benefits available to me?

Up to date information on all benefits is available at the government website (https://www.gov.uk/browse/benefits), alternatively the national poverty charity, Turn2us has updated its benefits calculator to ensure it is up to date and factors in recent coronavirus changes. (https://benefits-calculator.turn2us.org.uk/AboutYou)