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31 Oct 2020

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

The Financial Conduct Authority confirms new support for credit and overdraft customers from November

Homeowners will be able to apply for a mortgage payment holiday for up to six months if they are facing financial difficulty as a result of coronavirus, following the announcement of a new national lockdown.

Financial assistance schemes designed to help borrowers during the pandemic, allowing them to take debt repayment holidays without it affecting their credit files, were due to expire on 31 October.Millions of people have received financial help with their mortgages, as well as other forms of credit

However, following the prime minister's announcement of a new national lockdown on 5 November, HM Treasury has confirmed that anyone needing to take a payment holiday on their mortgage, who hasn't already taken one, will be able to do so for up to six months. These payment holidays will have no impact on your credit history.

The ability to take payment holidays has been offered on credit cards, store cards, catalogue credit, personal loans, overdrafts, motor finance, buy-now-pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit products. This expired on 31 October, although the Financial Conduct Authority is considering extending the financial assistance schemes to these forms of credit.

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

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What are the FCA's proposals for ongoing support?

The FCA has outlined a range of measures which it expects to see from financial firms when the official coronavirus guidance ends on 31 October.

These expectations include:

  • Provide tailored support Firms should offer support that suits customers' circumstances, recognising the various financial uncertainty and challenges they may face in the coming months.
  • Help avoid missed payments Work with customers coming to the end of a payment deferral and offer support before any payments are missed.
  • Offer flexible options A range of short-term and long-term help, and payment options should be offered to customers, minimising stress and anxiety.
  • Make sustainable payment plans These should factor in customers' other debts and essential living expenses, and therefore be affordable.
  • Give realistic repayment timelines Customers should not be pressured into making repayments in an unreasonably short period of time.
  • Help keep balances under control Interest, charges and fees should be waived, cancelled, reduced or suspended if necessary.
  • Keep vulnerable customers in mind Recognise and respond to their specific needs.

The FCA also wants overdraft customers who received financial help to be contacted to see if this help is still needed. If they do (or a newly affected customer gets in touch), firms should offer tailored support such as waiving or reducing interest, agreeing on a plan of staged reductions in their overdraft limit or supporting customers to reduce their usage by transferring the debt. It will monitor firms to ensure customers are being treated fairly.

Crucially, any customers who require financial assistance after the guidance ends in October will see the help recorded on their credit file in accordance with the normal reporting process. The FCA says firms must make the implications of this clear to customers when they offer the support.

This guidance came into force today (2 October).

The FCA's 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, which came into force on 9 April. The measures included:

  • Firms should offer a three-month payment freeze on loans and credit cards for consumers facing financial difficulties as a result of the coronavirus crisis
  • 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.

On 1 July, the FCA confirmed how it wants the support to continue. From 3 July, credit firms must set out the following options to their customers experiencing financial difficulty due to COVID-19:

  • Check if payments can resume Towards the end of a payment freeze, firms should contact their customers to find out if they can resume payments and agree a plan on how the missed payments could be repaid. If they can afford it, they should start repayments.
  • Offer payment help For customers still facing temporary payment difficulties as a result of the coronavirus crisis, firms should provide them with support by reducing payments on their credit card and personal loans to a level they can afford for three months. They can make minimum repayments or be offered another three-month payment holiday. People receiving help should not have their credit card suspended.
  • Support for overdraft customers Firms should allow customers who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account, to request up to £500 interest-free for a further three months. They should also provide further support in the form of lower interest rates on borrowing above the interest-free buffer and repayment plans for those who would benefit from them.
  • Extending the deadline Customers that have not yet had a payment freeze or an arranged interest-free overdraft of up to £500 and experience temporary financial difficulty, due to coronavirus, would be able to request one up until 31 October 2020.
  • No negative impact on credit reports Where a customer needs further temporary support, any payment freezes or partial payment freezes offered under the FCA's guidance should not have a negative impact on credit files. However, the FCA warns credit files aren't the only source of information which lenders can use to assess creditworthiness.

The FCA also confirmed that it will not extend the requirement for firms to make sure that overdraft customers were no worse off on price compared to prices they were charged before recent overdraft changes came into force. In April, the FCA had asked firms to temporarily reduce overdraft charges to reflect this requirement.

Instead, firms are now free to set their own interest rates on overdrafts, but customers with financial difficulties should be able to request support on additional borrowing in excess of £500.

What's more, any firms that do choose to increase overdraft charges should give overdraft customers an opportunity to seek extra support before the changes come into force.

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.

On 15 July, the FCA confirmed how it wants the support to continue. From 17 July, credit firms must set out the following options to their customers experiencing financial difficulty due to COVID-19:

  • Check if payments can resume: Firms should contact customers at the end of their first payment freeze to see if they can resume payments, and agree a plan on how to do so.
  • Offer payment help: Customers who are still facing financial difficulties due to coronavirus should be offered support by freezing or reducing payments for a further three months. For BNPL customers within their promotional period would see that extended; pawnbroking agreements within the redemption period would be extended by three months, or agreeing not to sell the item for three months if the redemption period has ended; payday loans firms would provide a range of support, including formal forbearance.
  • Extending the deadline: Customers that have not yet had a payment freeze would be able to request one up until 31 October 2020.
  • Continued ban on repossessions: Motor finance and RTO customers still experiencing payment difficulties who need vehicles or goods would not face repossession until 31 October 2020.
  • No negative impact on credit reports: Where a customer needs further temporary support, any payment freezes or partial payment freezes offered under the FCA's guidance should not have a negative impact on credit files. However, the FCA warns credit files aren't the only source of information which lenders can use to assess creditworthiness.

Which providers are offering payment holidays for personal loans?

A number of personal loan providers have been offering payment holidays on personal loans and waiving fees for missed payments if their customers are facing financial difficulties.

According to the latest data from UK Finance released on 17 July, 707,000 payment deferrals on personal loans have been granted over the past three months.

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

LenderCoronavirus repayment relief policyHow to apply
BarclaysIndividual 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 DirectYou 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.
HSBCThree-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 BankCan offer payment holidays, but this is decided on a case-by-case basis.Call 0345 080 8500 to discuss your options.
MonzoHas 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 loansin your message.

woman on the phone holding a credit card

What are credit card providers doing to help?

A number of credit card providers have said customers can 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.

UK Finance data from 17 July 2020 revealed that lenders have already provided 1.05 million credit card payment deferrals over the past three months.

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

LenderCoronavirus repayment relief policyHow to apply
BarclaysThree-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 DirectYou 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.
HSBCThree-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 BankWill 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.
NationwideIncreased 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.

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.

UK Finance figures released on 17 July reveal that over the past three months more than 27million customer accounts have been offered three months of interest-free borrowing on the first £500 of their arranged overdrafts.

LenderOverdraft changesWhat else the bank told us
Al Rayan Bankn/aIt will work with customers on an individual basis to assess what help is available and help them manage their finances.
BarclaysOverdraft 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 DirectDue 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.
HSBCFrom 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 andmanage your current arranged limitmanage 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 BankWaiving 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.
MonzoUse 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.

Mortgage payment holidays

On 17 March, the government announced that homeowners who are up to date with their payments can apply for a three-month payment holiday from 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 have it extended for a further three months if required.

Following the announcement of a new national lockdown, people who face financial difficulty will be able to apply for a mortgage payment holiday for up to six months, if they haven't already had one. Those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.

However, the Financial Conduct Authority has stated that homeowners who have already benefitted from a six-month payment deferral should speak to their lender to agree tailored support - suggesting that they will not be able to take further payment holidays without an impact on their credit history. Instead, banks will offer a range of short and long-term help, offered on a case-by-case basis.

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?

Under the temporary measures, the FCA told lenders to ensure that no one's credit reports and scores were impacted as a result of getting payment help. This will change after 31 October.

Payment holidays and temporary financial help before 31 October

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.

Financial help after 31 October

The guidance above applies to customers until 31 October, after which point anyone still receiving financial help from a provider - or anyone who seeks help for the first time - as a result of the coronavirus pandemic, will have that aid reported on their credit report.

The FCA says this reporting will help providers gain an insight into customers' circumstances and reduce the risk of unaffordable lending.

Lenders should make the credit report implications clear to customers when they set out options for financial help.

This guidance will be kept under review and may be changed if circumstances change significantly.

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.

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:

Al Rayan BankWill work with customers on an individual basis to assess what help is available and help them manage their finances.
Atom BankCustomers with financial difficulties will be assessed on a case-by-case basis.
Bank of London and the Middle EastNo immediate changes to policy, but customers facing financial difficulty should contact the bank for help as soon as possible.
BarclaysFixed savings accounts can be closed early with no charge.
Cambridge Building SocietyAffected customers should get in touch as soon as possible for help.
Darlington Building SocietyAffected customers should get in touch as soon as possible for help.
First DirectFixed savings accounts can be closed early with no charge.

pile of coins

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 customera 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? calls for extension of COVID-19 financial support

We're calling for the financial regulator to extend its help for consumers facing financial difficulties due to COVID-19 into 2021.

Our submission to the FCA recommends the following protections to prevent households facing a financial cliff edge when payment holidays, interest-free overdrafts and the furlough scheme come to an end.

  • Payment holidays should be extended by three months until 31 January 2021. Lenders should continue to offer options such as payment rescheduling or freezing interest, if they are right for the customer.
  • It's too early to return to existing forbearance rules, as firms with stretched resources will be unable to offer tailored support to struggling customers.
  • Credit reports should continue to be unaffected by payment holidays. Anyone who accesses a payment holiday must not have their long-term creditworthiness negatively impacted.
  • Timescales for complaints should be reduced so consumers can get urgent support. We have seen cases of slow handling of complaints by banks and the Financial Ombudsman.

Gareth Shaw, head of money at Which?, says: 'The regulator has acted quickly and effectively to help those struggling due to the pandemic, but it must be prepared to take further bold action to prevent millions of people from being hit by a perfect storm of financial pressures in the coming months.

'The huge number of payment holidays taken highlights the scale of financial difficulty people in this country are facing - a situation that is likely to become worse as support measures such as the furlough scheme come to an end.

'The regulator must treat all consumers fairly - ensuring that financial support is still provided to those who need it and also available for those who may face financial problems for the first time after 31 October.'

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.

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This story was published in March and has been updated since then. The last update was on 2 October with information about the FCA's confirmed plans for tailored ongoing support.