First published 1st April 2020
Coronavirus has created unprecedented and far-reaching financial uncertainty for countless UK households.
A quarter of the UK’s workforce has now been furloughed and are only receiving 80% of their salary capped at £2,500 a month until as late as the end of October. Others have been made redundant, lost freelance or contract work and even forced to close their own businesses.
If you’ve suddenly lost your income, the first port of call is to check if you qualify for state benefits (as well as statutory sick pay if you are self-isolating). The government has relaxed some rules around claiming, so head over to the Gov website to find out.
But help is also available if you are struggling to pay your household bills. We’ve rounded up the answers to the most frequently asked questions below. Do bear in mind it’s an ever-evolving situation, so we’ll be updating this page when things change.
What can I do if I’m struggling to pay my energy bills?
Disconnections have been completely suspended, so you won’t lose access to your energy. But, if you feel you will fall into difficulties, get in touch with your supplier.
Most are offering some of the following measures for people struggling to pay:
- Bill delays
- Waived late payment fees
- Spreading out repayments
- Alternative payment methods
Water companies are offering similar measures – but you’ll have to call and ask.
I use a prepayment meter for my gas and electricity. What should I do?
Energy regulator, Ofgem, has ordered suppliers to take ‘proactive measures’ to support prepayment meter customers – especially those who in vulnerable circumstances. Get in touch with your supplier to find out how it can help you.
If you are self-isolating and have a prepayment meter, solutions include the energy supplier adding credit direct to your meter, posting credit-loaded cards to your address or letting someone you nominate top up for you.
Can I still telephone my energy provider?
You should be able to get through to a customer service representative using the standard phone number – it may just take a little longer. If you don’t have time, your best bet is to send an email or use its online chat function if it has one.
I was due to have a smart meter installed. What happens now?
Most suppliers have paused all non-essential meter installations until the government says it is safe to proceed. Your supplier will contact you once the installation can go ahead.
Can I still switch energy providers?
Yes. The pipes, meters and energy are all the same. The only difference will be who sends your bill from. Suppliers are telling us there is no delay to switching times currently either.
What help is available for mortgage borrowers?
Regulator the Financial Conduct Authority (FCA) has ordered banks to give mortgage customers who are struggling to make payments because of coronavirus a minimum three-month payment break.
Note, however that this isn’t free money: you’ll have to pay the sum back in the fullness of time – and with interest. You just won’t be penalised for missing payments in the short term.
Who can apply for a mortgage holiday?
Anyone who holds a mortgage is currently permitted to apply for a mortgage holiday – although you are not legally entitled to one.
How do I apply for a mortgage holiday?
Contact your mortgage lender with details of your mortgage account to hand. It may be quicker to do this online.
If your mortgage payment freeze is approved, bear in mind some lenders will require up to 10 days’ notice so it may not kick in until the following month.
Do I need to prove I have been impacted by coronavirus?
Many lenders are offering fast-track approval, so you may not be asked to provide evidence of your situation or undergo means testing.
However, you will still need to answer all questions accurately. And you should only apply for a mortgage payment holiday if you are struggling as a direct result of coronavirus.
When will I have to repay the deferred payments?
How you eventually repay what you owe from your mortgage holiday varies between lender. However, it’s most likely to do one of the following:
- Spread the cost of the shortfall across the remaining term of your mortgage (resulting in bigger monthly payments once the holiday has ended)
- Increase the length of your mortgage term (but keep payments the same)
Will taking a mortgage holiday affect my credit score?
Provided you have a formal agreement in place to take the payment holiday and you meet your repayment obligations once it has come an end, it will not affect your credit score.
Find out more at our mortgages and coronavirus guide.
What help can I get with credit card repayments?
The FCA has also said that all credit card holders must be able to request a minimum three-month payment freeze on card repayments, during which time you will either pay nothing or an agreed nominal sum.
The FCA has applied the same minimum payment break to store cards, catalogue credit and personal and guarantor loans.
Will I still be charged interest?
Credit card providers will still be permitted to charge a ‘reasonable’ rate of interest over a payment holiday. Bear in mind this interest will build up over time and work out more costly in the long-term.
APRs (annual percentage rates), particularly on store and credit cards, are expensive so only take the payment holiday if you really need to.
If you can’t make the minimum repayments and can afford to do so, consider paying a smaller sum instead.
If, at the end of the agreed holiday, you are still struggling to make payments, the FCA says that providers must exercise further forbearance on a case by case basis. This could include waiving interest which has built up over the payment freeze or extending the payment holiday.
Will my credit score be affected?
As with mortgage payment holidays, an agreed payment holiday on your credit card, store card or catalogue debt will not negatively impact your credit score. However, if forbearance is exercised beyond three months and you enter into a debt repayment plan, this may no longer be the case.
What help can I get with personal loan repayments?
The FCA guidance applies to personal loans too. You will be able to apply for a three-month payment holiday and request further forbearance after this time if you’re still struggling.
The deferred debt would be repaid by either spreading the cost of the shortfall across the remaining term of your loan (resulting in larger monthly payments) or increasing the length of your loan term (but keep payments the same).
Again, interest will accrue during your loan payment holiday, so only take it if you really need to. Agreed payment breaks will not affect your credit score.
What about my payday loan?
A minimum one-month payment freeze has also been applied to payday lending. And crucially here, the interest – which is often notoriously expensive – can accrue in that time.
What about other short-term debt?
Three-month payment holidays on rent-to-own, buy-now-pay-later and pawnbroking sectors.
Can I get a holiday on my car finance loan?
The same three-month payment break is available for those struggling to pay their car loans. Finance companies will not be able to repossess vehicles during the payment holiday.
What about overdrafts on current accounts?
All banks must offer the first £500 of an overdraft interest-free to customers affected by coronavirus. The rules apply to current account holders who already have an overdraft facility – although you should be able to request one too if you are struggling.
Existing FCA legislation ruled that from, April 6, current account providers must only charge one single rate of 40% interest (AER) on both arranged and unarranged overdrafts, with no additional daily charges.
Now the FCA says that nobody paying the 40% rate should be worse off than before the rules were introduced for the next three months.
Interest Rate Cut
Will the cut in base rate mean cheaper borrowing?
In March, the Bank of England’s monetary policy committee (MPC) reduced the base rate on two separate occasions, taking it from 0.75% down to its current miniscule 0.1%. But could this have a positive effect on your borrowing?
Mortgages: if you have tracker mortgage, you should see the total 0.65% reduction passed on immediately, meaning your monthly repayments will also fall. Lenders should also pass on the full reduction to their standard variable rates. If you have a fixed rate mortgage however, your payments will not change.
Credit cards: interest rates charged on credit cards – typically in the region of 20% APR – are much higher than base rate and are largely unaffected by any changes to it.
Loans: interest on personal loans tends to be fixed at the outset, so any the base rate cut will not result in lower monthly repayments.
Overdrafts: new rules mean a standard rate of 40% AER will be charged on all overdrafts – although rules may slightly different for those affected by coronavirus – regardless of the base rate.
How will the current situation affect my credit score?
So long as any payment holiday, payment reduction or any other forbearance has been agreed, your credit score will not be affected.
However, if you cancel a direct debit, stop making payments or do not have adequate funds to cover it your payment without an official agreement, standard rules apply, and your score could be negatively impacted.
This is also likely to be the case if you’ve come to the end of an agreed spell of forbearance but then require longer-term help such as a debt repayment plan.
Keep the following guidance in mind when it comes to protecting your credit score.
- Always try to make at least your minimum monthly repayments
- Avoid taking out any further lines of credit if you can
- Make sure any payment holiday has been officially agreed with your lender
- Stay in touch with your lender if you are still struggling
Can I access my savings if they’re locked away?
If your savings are locked in a fixed rate savings account, many providers are waiving the penalty charge to access the cash before the agreed term comes to an end. Check directly with your savings provider.
However, bear in mind that with the recent drop in interest rates, returns may not be as favourable if you are looking for a fixed rate savings account in the future.
If you are struggling to meet the cost of your premiums on any kind of insurance policy – including travel, life and car, your insurer must support you.
This could take the form of temporary reduction in cover or a change of policy where appropriate – which results in cheaper premiums or a partial refund of an annual premium you’ve already paid.
If you can’t come to an arrangement with your insurer, you can request a payment deferral of between one and three months – in some cases longer. You will need to contact your insurer direct and ask for the support before 18 August when it will be reviewed again by regulator, the FCA.
Here are some common questions on car insurance specifically.
Can I cancel my policy if I’m not using my car?
Unless you officially register your vehicle off road by applying for a SORN, the law states you need valid car insurance. This means you will not be able to ‘suspend’ your policy just because you are not using your car.
If you do decide to declare your car as SORN because of coronavirus and want to cancel your insurance policy some providers are waiving the cancellation fee.
What if I can’t afford my car insurance payments?
Ask your car insurer for help if you are struggling to make payments. Help could include a temporary reduction in cover – from fully comprehensive to third party, fire and theft for example – which reduces your monthly premiums or triggers a partial refund if you’ve paid for the year upfront. You can also request a payment deferral of between one and three months – in some cases longer.
There are other measures you could take yourself, too. For example, if your car insurance premium is due and you usually pay annually, consider switching to monthly direct debit. While this can work out more expensive, it could ease cash flow problems in the short term.
I’m now returning to work but driving instead of getting public transport. Is my car insurance still valid?
Your insurance policy is still valid – and you do not need to contact your insurer to update your documents or extend your cover.
What’s going on with MOTs?
You will be able to defer scheduled MOTs for six months. However, this is provided your car is legally roadworthy. You can make your own simple checks on your vehicle as we explain in this guide.
For more information, head to our car insurance and coronavirus guide.
Can I still buy travel insurance?
The Foreign & Commonwealth Office (FCO) is advising against all non-essential international travel for an indefinite period, having initially issued the advice for 30 days (on 17 March).
This means that many providers have stopped offering travel insurance completely. If you can get travel insurance, it will be a specialist policy for ‘essential’ travel which has a very limited definition. It also will not cover coronavirus.
For more information, head to our coronavirus advice for travellers.
Is my current home insurance still valid?
You will not need to update your home insurer even if you have been at home 24/7 during lockdown. For more information, head to our home insurance and coronavirus guide.
Can buy wedding insurance?
Wedding insurance has been completely suspended for the time being.
Can I buy unemployment insurance?
Unemployment cover is not currently being offered.
Is business insurance still available?
Can my landlord evict me if I can’t pay rent?
Landlords in England and Wales will need to give at least three months’ notice before starting eviction proceedings – even if you have not been managing to pay your rent. In Scotland it’s six months.
The rules apply to both private and social housing tenants who receive notice between March and September 2020.
If you are still struggling after that point, your landlord will be required to work with you to draw up a payment plan.
Note that landlords with buy-to-let mortgages also qualify for the three-month payment holiday. And while there is no legal obligation to pass on the cost saving to the tenant, there is a strong moral one – tenants who are struggling financially due to coronavirus have a strong case.
The housing charity Shelter has more information on renting and coronavirus here.
Can I get help if I can’t afford my bills?
The major broadband and mobile service providers have agreed a set of temporary measures to offer fair help and support if you’re worried about paying.
They are also removing data allowance caps on fixed broadband services and releasing generous temporary packages for mobile customers. They will offer alternatives if priority repairs to fixed broadband and landlines cannot be carried out.
Is switching broadband still possible?
Yes, unless you’re a Virgin Media or cable customer, which need a BT engineer to visit for the switch. Engineers aren’t being sent out for this sort of thing due to social distancing rules.
The networks are saying they have the capacity to conduct switches as normal, and that networks and call centres should be able to cope if you want to upgrade to a faster package.
Switching should take two hours, though in rare cases it can be longer.