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Coronavirus: what it means for mortgages, credit cards, loans and savings

We explain the Treasury's move to cut the lifetime Isa withdrawal penalty, plus help for credit card, loan and mortgage borrowers

Coronavirus: what it means for mortgages, credit cards, loans and savings

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

The latest move comes from the Treasury which has announced it has lowered the withdrawal penalty on lifetime Isas from 25% to 20% to help those who need to access their savings during the coronavirus crisis.

This comes on top of new measures, including payment holidays for credit card, loan, motor finance and mortgage borrowers, renters being offered protection against eviction and some banks allowing savers to access money held in fixed-term accounts early without penalty.

Click the links below to find out which measures have been put in place to aid your finances during the coronavirus crisis.

Keep up to date on the latest coronavirus news and advice with Which?


Lifetime Isa withdrawal penalty reduced

In another measure to help those who need to access their savings during the coronavirus crisis, the Treasury announced on 1 May 2020 that it would be reducing the lifetime Isa withdrawal penalty to 20%, down from 25%.

This measure will be in place between 6 March 2020 to 5 April 2021.

Lifetime Isa savers are charged this amount on any withdrawals that aren’t for the purpose of buying their first home or in retirement before they reach the age of 60.

So, if you take £1,000 out of your account while the penalty is reduced, you’ll lose £200 to HMRC. Before this measure, you would have lost £250.

The withdrawal penalty exists to recoup the government’s 25% bonus paid on the money savers deposit. However, in practice, being charged 25% on your withdrawal not only meant you had to repay the government bonus, but you also lost 6.25% of your own cash.

Accessing money in savings accounts

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.

Here is a full list of the banks we’ve heard from so far:

Lender Policy
Al Rayan Bank Will work with customers on an individual basis to assess what help is available and help them manage their finances.
Atom Bank Customers with financial difficulties will be assessed on a case-by-case basis.
Bank of London and the Middle East No immediate policy changes.
Barclays Fixed savings accounts can be closed early with no charge.
Cambridge Building Society Affected customers should get in touch as soon as possible for help.
Darlington Building Society Affected customers should get in touch as soon as possible for help.
First Direct Fixed savings accounts can be closed early with no charge.
HSBC Early access to fixed savings accounts enabled without penalty charges.
Hinckley & Rugby No immediate policy changes, but keeping the situation under review.
Ipswich Building Society No immediate plans to change savings policy, but will work to help members facing financial difficulties.
Lloyds Banking Group (including Bank of Scotland, Halifax and Lloyds Bank) Emergency access to fixed-term savings.
Leeds Building Society No immediate policy changes. Fixed bonds can be broken in exceptional circumstances.
Metro Bank No immediate policy changes; encouraging customers who do need additional support to contact the bank as soon as possible for help.
Monzo Has specialist teams in place to monitor the situation and support people in financial difficulty.
Nationwide Offering penalty-free early access to savings in fixed-term accounts.
Newcastle Building Society Affected customers should get in touch as soon as possible for help.
RCI Bank Has never imposed financial penalties for those who close fixed accounts early. Will handle enquiries on a case-by-case basis and will take factors, such as illness, into consideration.
Royal Bank of Scotland (including NatWest and Ulster Bank) Fixed savings accounts can be closed early with no charge.
Santander Immediate access to fixed-term cash Isas and savings accounts without penalties.
Skipton Building Society Any customers experiencing payment difficulties should get in contact as soon as possible and their situation will be reviewed on a case-by-case basis.
Tipton Building Society No immediate policy changes.
TSB Fixed Isa accounts can be closed with no charge and fixed bond customers can surrender their policies early.

The FCA’s new borrowing relief measures

On 2 April, the FCA proposed a range of temporary measures to offer support to people struggling with their finances due to the coronavirus pandemic.

It wrote to banks suggesting they implement the following rules:

  • Firms should offer a three-month payment freeze on loans and credit cards for consumers facing financial difficulties as a result of coronavirus
  • Customers who have already been financially affected should be charged zero interest on overdrafts of up to £500 for three months
  • Firms should ensure all overdraft customers are no worse off than they were before the recent changes to overdraft pricing came into force
  • Firms should ensure none of these temporary measures will affect credit ratings.

The FCA requested responses from lenders by 6 April and says that the measures would come into force by 9 April. That deadline has come and some lenders have used it as an opportunity to improve what they are offering customers.

Motor finance and high-cost credit

On 24 April, the FCA confirmed further measures for motor finance and high-cost credit customers.

It states 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.

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.

Which providers are offering payment holidays for personal loans?

A number of personal loan providers have announced that they will offer payment holidays on personal loans and waive fees for missed payments if their customers are facing financial difficulties.

We’ve set out the policy of each lender in the table below.

Lender  Coronavirus repayment relief policy How to apply
Barclays Individual customers can apply for a three-month loan payment holiday. Business customers can get 12-month repayment holidays on loans of more than £25,000. Apply online – those who were already in financial difficulty before the coronavirus crisis will need to call 0800 716598.
First Direct You can apply for a three-month loan payment deferment – even if you’ve already missed a loan payment. You’re not able to top up existing loans, and any other extra credit must be applied for in the usual way and is subject to the usual credit checks. Fill out the online PDF and email it to lending.support@firstdirect.com. First Direct will get in touch to let you know whether the application is successful.
HSBC Three-month loan deferments can be applied for until 20 June 2020. This will usually apply to your next three loan payments, but if a payment is due shortly it may have to wait until the following month. Apply online for Halifax. Apply online for Bank of Scotland. Apply online for Lloyds Bank.
Lloyds Banking Group (including Bank of Scotland, Halifax and Lloyds Bank) No fees for missed payments on loans, plus payment holidays and additional support where customers need it. Apply online for Bank of Scotland. Apply online for Halifax. Apply online for Lloyds Bank.
Metro Bank Can offer payment holidays, but this is decided on a case-by-case basis. Call 0345 080 8500 to discuss your options.
Monzo Has specialist teams in place to monitor the situation and support people in financial difficulty. Is encouraging customers to get in touch if they are worried about loan repayments. Unable to offer emergency loans. Use the in-app live chat service.
Royal Bank of Scotland (including NatWest and Ulster Bank) Borrowers can apply to defer loan payments for up to three months. Request payment deferrals through the mobile app – after logging in, select Help at the bottom of the screen, followed by Message us. Quote coronavirus loans in your message.
Santander From 8 April, customers – including those who have recently missed payments – can apply for a payment holiday of up to three months online. Fill out the online form.
TSB Personal loans already allow repayment holidays as standard for customers who need short-term relief; these are subject to approval. To be eligible, you must have made at least one loan repayment and have a direct debit already in place, be up to date with your loan repayments and have at least 30 days remaining on your loan term. Apply online – you must log in to your online banking account, select your loan from the Your Accounts screen and click on the repayment holiday tab.
Virgin Money Encourages affected customers to get in touch to discuss their options. It will consider options such as payment holidays and debt restructuring.

What are credit card providers doing to help?

A number of credit card providers have said customers will be able to apply for a temporary increase to their credit card limit or payment holidays.

Some will also offer refunds on any fees charged for withdrawing cash on a credit card.

The table below sets out what lenders have announced and told us.

Lender Coronavirus repayment relief policy How to apply
Barclays Three-month payment holidays are available for those who haven’t missed any Barclaycard payments between September 2019 and February 2020 (missed payments in March and April are being overlooked). Late payment charges and cash advance fees will be waived for 90 days from 19 March. Apply online. If your application is accepted, Barclaycard will let you know, and it’ll show as a message in your next statement.
First Direct You can request a three-month credit card payment holidays until 20 June 2020. From 8 April to 8 July, no late payment fees will be charged for any late credit card payments; this will be applied automatically. Fill out the online form to request a payment holiday, and First Direct will contact you by email or letter to let you know if you’re successful.
HSBC Three-month payment holidays are available for credit card customers with short-term financial difficulties. Requests will be accepted until 20 June 2020. No late payment fees will be charged on credit card repayments between 8 April to 8 July 2020; this is applied automatically. Apply online for a payment holiday, and wait to hear whether your application has been successful – the decision will either be sent by post or email.
Lloyds Banking Group (including Bank of Scotland, Halifax and Lloyds Bank) Three-month repayment holidays can be applied for online; there are no fees for missed credit card payments, and promotional interest rates won’t be removed in the short term. Apply online for Bank of Scotland. Apply online for Halifax. Apply online for Lloyds Bank.
Metro Bank Will consider waiving credit card fees, increasing credit limits, offering payment holidays and moving credit card debt to a personal loan with a lower interest rate – all decided on a case-by-case basis. Call 0345 080 8500 to discuss your options.
Nationwide Increased credit card limits and removal of interest charges for members in financial difficulty. Offering a three-month payment holiday reducing monthly payments to £1. Must be up to date with payments. Apply for a payment holiday online.
Royal Bank of Scotland (including NatWest and Ulster Bank) Offering three-month payment holidays from 9 April. Refunds offered on credit card cash advance fees. Affected customers can apply for a temporary increase to their credit limit. No late payment fees for credit card payments will apply between 1 April and 30 June 2020. Currently no specific info about applying for credit card payment holidays.
Santander Removing late payment fees and offering cash advances from 30 March. Additionally, from 6 April, any customers who were up to date with repayments before the coronavirus impact can apply for a three-month credit card payment holiday. Customers who have missed a payment can’t apply online for a payment holiday at the moment, but this will hopefully be resolved. Fill out the online form.
TSB Affected customers can request an emergency credit limit increase. Those who are struggling to make credit card repayments can apply for a three-month payment holiday, subject to eligibility. Apply using the online form.
Virgin Money Encourages affected customers to get in touch to discuss their options. It will consider options such as debt restructuring and temporary increases in credit. Also offering three-month credit card payment holidays – you must continue to make minimum repayments until the payment holiday has been confirmed. Can apply online.

Rules around persistent debt

The FCA says credit card firms should provide ‘strong support’ by offering ‘greater flexibility to customers in persistent credit card debt’.

Currently, lenders need to contact customers who have been in persistent debt for 36 months to offer them options to repay their borrowing more quickly. If they don’t respond within a set timeframe, firms must suspend their credit card.

These rules will now be relaxed, with the FCA set to contact lenders to advise them to give customers more time.

Which banks are offering interest-free overdrafts?

In the table below, we set out how banks are changing their overdraft policies to help customers.

Lender Overdraft changes What else the bank told us
Al Rayan Bank n/a It will work with customers on an individual basis to assess what help is available and help them manage their finances.
Barclays Overdraft interest will automatically be waived from 27 March to 30 April. Offering a fee-free buffer of £750 on all pre-arranged overdrafts, along with a temporary interest rate of 19.51% EAR. This will be automatically applied for both new and existing customers. If you were overdrawn before 22 March 2020, you’ll still have to pay a daily fee. Current overdraft limits won’t change; any extensions to overdraft limits should be applied for in the usual way.
First Direct Due to increase the overdraft fee-free buffer to £500 in the next few days, but further information is not yet available. Suspended sales of new current accounts.
HSBC From 26 March, interest-free overdraft buffer increased from £25 to £300 for HSBC Bank Account and HSBC Advance Accounts for three months. This was allocated automatically. From 9 April 2020, for three months, it’s extending this support by temporarily not charging interest on the first £500 of overdraft borrowing. Additionally, for these customers, it’s temporarily charging 19.9% EAR (variable) for any arranged overdraft balances above £500. If you would like to add an overdraft or increase your existing limit, you can log on to online banking and manage your current arranged limit This link will open in a new window.
Lloyds Banking Group (including Bank of Scotland, Halifax and Lloyds Bank) Interest-free overdraft buffer of £500 from 9 April to 9 July 2020; anyone with arranged overdrafts of less than £500 will have their whole overdraft interest-free. You can also apply for an increased overdraft limit through your online banking app. Increased deposit limits of up to £500 in online banking (including up to £500 using cheque scanning) to help people who can’t access branches. There is also a new dedicated phone line for customers who are aged 70 or over, have been identified as vulnerable or may need extra support, as in the case of NHS workers.
Metro Bank Waiving overdraft interest from 1 March until 30 June for personal customers. Also allowing ATM withdrawals of up to £300 a day, and temporarily waiving the requirement to give 24 hours’ notice for cash withdrawals of more than £1,000 – there is now a £5,000 daily limit.
Monzo Use the in-app live chat if you’re worried about overdraft repayments. Unable to offer emergency overdrafts. Has specialist teams in place to monitor the situation and support people in financial difficulty.
Nationwide Increased overdraft limits and removal of overdraft interest charges for members in financial difficulty. Fee-free overdraft holidays from 20 April until 1 July to those who have been financially affected by coronavirus; requests can be submitted via an online form. Reducing overdraft interest rate from 39.9% APR to 18.9% APR.
Royal Bank of Scotland (including NatWest and Ulster Bank) Overdraft interest rates will be kept at their current rate between 30 March to 30 June. Customers can also apply for an increased overdraft limit of £500. Customers can apply for an increased cash withdrawal limit of £500.
Santander £500 interest-free overdraft buffer for three months from 6 April to 9 July, which is applied automatically. A temporary interest charge discount on standard overdraft rates to 19.9% will also be applied. Customers in need of urgent financial assistance should call a new dedicated phone line on 0800 015 6382.
Starling Bank Three-month interest holidays on the first £500 of overdrafts are available from 1 April to 30 June 2020.  To apply, contact customer service by phone, email or in-app chat.
TSB From 8 April, those with arranged overdraft limits of less than £500 will be interest-free (you won’t automatically get a bigger limit); those with higher limits will get the first £500 interest-free. Interest is also reduced to 19.84% EAR. These changes will be made automatically.
Virgin Money Customers can apply online for an interest-free overdraft buffer of up to £500 lasting until 30 June. This will not increase your overdraft limit. Encourages affected customers to get in touch to discuss their options. Will consider options such as debt restructuring and temporary increases in credit.

Mortgage payment holidays

On 17 March, the government announced that homeowners who are up to date with their payments can apply from a three-month payment holiday on their mortgage. A day later, this policy was extended to buy-to-let mortgages.

On 2 June, the FCA confirmed mortgage holidays will be available to the end of October. This means those who haven’t already applied for a mortgage holiday now have until 31 October to do so, and those who already have a three month mortgage holiday can get it extended for a further three months if required.

Borrowers can apply for the holiday by contacting their lender and self-certifying that their income will be directly or indirectly affected by the coronavirus pandemic.

You can find out more in our comprehensive story on how to apply for a mortgage payment holiday.

How will payment holidays affect your credit score?

The FCA says lenders should ensure the temporary measures don’t impact credit reports and scores.

Meanwhile, the UK’s three main Credit Reference Agencies (CRAs) have pledged to protect credit scores during the coronavirus pandemic.

Experian, Equifax and TransUnion have agreed to an ‘emergency payment freeze’, with new guidance which ensures an individual’s credit score is not affected over the duration of the agreed payment holiday.

This will freeze anyone’s credit score whenever someone agrees to a temporary payment arrangement with a lender or credit provider. 

The emergency payment freeze can apply to mortgages, loans, credit and store cards, plus catalogue credit, and will cover a payment holiday as well as reduced payments or increased credit limits.

However, you must not simply cancel your direct debits or fail to pay your bill – there must have been an agreement with your lender. 

Taking it upon yourself to stop paying something such as your mortgage or credit card bill will mean a missed payment default is recorded on your credit report, which will harm your credit score. 

For more information on how lenders and credit reference agencies are pledging to protect your credit score, see our full article.

Help for tenants facing eviction

The government has brought forward emergency legislation to protect tenants from eviction.

The reforms mean that from 26 March until at least 30 September, landlords must provide three months’ notice in advance of starting proceedings to evict private or social tenants.

The courts have also taken measures to suspend all proceedings for, and enforcement of, possession orders for a period of 90 days from 26 March.

The government’s decision to allow mortgage payment holidays for landlords with buy-to-let mortgages is designed to encourage landlords to offer flexibility to tenants if they’re struggling to pay their rent.The Which? Money Podcast

Using cash and making payments by card

There have been reports of some retailers refusing card payments because of fears the virus can be spread by notes and coins.

In a Which? survey of 2,003 people conducted in March 2020, 15% told us their local shop stopped accepting cash as a payment.

Early media reports suggested the World Health Organization (WHO) warned against using cash – a claim it later denied.

The Bank of England has said: ‘Like any other surface that large numbers of people come into contact with, banknotes can carry bacteria or viruses.’ So it’s fair to say that cash is safe to use as long as you wash your hands thoroughly after touching it.

With more than 2.2 million people in the UK reliant on cash, there are fears that the coronavirus restrictions could leave them struggling to pay for the essentials. 

Which? is calling on the government and retailers to offer those who rely on cash and don’t have a bank card as a way to pay. Prior to the lockdown, Chancellor Rishi Sunak had committed to protecting access to cash.

If you’re a vulnerable customer a number of banks are allowing friends or family to withdraw cash for you. 

Meanwhile, the spending limit for contactless card payments has risen from £30 to £45. From 1 April 2020, an increasing number of retailers should accept contactless payments up to the new higher limit.

The change has been brought forward as part of the industry’s response to the coronavirus outbreak, to help cut queues at the checkout.

RBS and TSB will allow customers to apply to increase their maximum cash withdrawal limit at an ATM to £500.

Lloyds Banking Group is offering increased deposit limits for online banking to help people who may not be able to access branches, including up to £500 using cheque scanning.

Reduced bank branch openings

Several banks have announced that they will be operating reduced opening hours as well as imposing social distancing measures in their branches.

Many are therefore advising that you only visit a bank branch if absolutely necessary and are encouraging people to use their online banking and app services instead.

Universal Credit and other benefits

The government has introduced a number of temporary measures to help workers who have to take time off work to self-isolate.

Statutory sick pay is now available to all employed workers from day one when self-isolating, rather than day four. 

On Monday 9 March, the government confirmed that any Universal Credit claimants who can’t attend their job centre appointment due to being in self-isolation should tell their work coaches and they won’t be sanctioned.

However, this is at the discretion of the work coach, who must be contacted before the appointment is due.

Under normal circumstances, Universal Credit claimants would need to meet their work coach to demonstrate their claimant commitments. Failure to do so results in a ‘sanction’, which is when your benefits are cut.

Self-employed and gig economy workers will also be able to apply for Universal Credit or new-style employment and support allowance (ESA) to compensate for the fact that they’re not entitled to statutory sick pay.

However, the Department for Work and Pensions (DWP) has confirmed that the pre-existing £16,000 savings limit will continue to apply; anyone with more than £16,000 in savings will not be eligible for Universal Credit payments.

Advances for Universal Credit are available immediately (as the benefit usually takes around five weeks to set up).

Which? news and advice on coronavirus

Experts from across Which? have been compiling the advice you need to stay safe and make sure you’re not left out of pocket.

Keep up to date on our latest coronavirus news and advice with Which?

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