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Issues paying your mortgage or rent due to coronavirus

26 March 2020: the economic impact of the COVID-19 outbreak is already affecting many people’s ability to make mortgage or rent payments. ICAEW’s Philippa Kelly outlines what help is available to those struggling with the coronavirus fallout.

Government action 

The government has set out that individuals who have difficulty paying a residential or buy-to-let mortgage due to coronavirus should be given a three-month payment holiday. These payments are deferred, and therefore added to the end of your mortgage term and interest will continue to accrue. You will pay more in the long term if you take this option, unless you are able to overpay in future (being minded of any early repayment charges). 

Eviction proceedings against renters will have a longer notice period, therefore cannot begin for three months. Renters who are experiencing financial difficulty should speak to their landlord or housing association. Private landlords can claim relief on buy-to-let mortgages, the intention is that the benefit is passed onto tenants in difficulty. 

Working with your lender

Banks and building societies are poised to work with customers to help them manage through these difficult times. 

In addition to the mortgage holiday set out by the government, you could also consider, in dialogue with your lender, other ways of flexing your household payments or savings. Some of these options may be particularly helpful if you are already in arrears on your mortgage (and therefore not eligible for a mortgage holiday according to government advice as at 19 March 2020). They include:   

  • Reducing the amount you pay on your mortgage each month (this will extend your mortgage term and therefore increase the overall cost of your mortgage).
  • Making longer term changes to your mortgage, for example by extending the term, moving to a different rate or switching all or part of your mortgage to interest-only.
  • Some banks and building societies will allow customers to access fixed-rate savings accounts early without closure charges.
  • “Breathing space” can be given in relation to unsecured loans.
  • Credit card and overdraft limits can be temporarily increased, and some lenders may offer a payment holiday. Some lenders are also removing interest charges for a set period.

Please note that many lenders are still setting up their enquiry forms to process applications for mortgage holidays, so it is important to check their website regularly. 
Many of the other options for managing your mortgage or other debt will be considered on a case by case basis, so it is important to have a clear picture of your financial circumstances. Evidence required may vary by lender and product, so it would be sensible to have scanned copies of any available evidence (changes to income, employment or other correspondence or otherwise which demonstrates that you will be in financial difficulty) ready. 
Branches and call centres are exceedingly busy, so it will be beneficial to do as much online as possible, which will also ensure you are appropriately social distancing. 
With the current situation changing on a daily basis, banks are continuously reviewing their policies and may remove overdraft charges (for arranged overdrafts) and modify other charges. For example, Barclays has automatically removed customer overdrafts fees from 27 March to 30 April to support people in financial difficulty. Again, it’s worth checking your bank’s website on a regular basis.
As with any financial difficulties, the earlier you speak to your lender, the more efficiently they can help. If it is getting close to your mortgage payment date and you are unable to make the payment speak to your lender as soon as possible.