Part of my function is to keep an eye on posts from others that may be of interest to our clients and contacts, and this one from Martin Lewis is important!
As we talked about at the time, in the early days of the pandemic, the Financial Conduct Authority moved to ensure that payment holidays were possible for borrowers. The window that was agreed took us through to the 31st October, after which the window will close!
If you haven’t yet taken advantage of a payment holiday, and want to, then time is running out to do so.
You can read the Martin Lewis post here, but I’m hoping he won’t mind too much if I summarise the key points below:
Payment holidays should be considered carefully. They are better than missing payments, but there are downsides to them.
Interest will still accrue whilst you’re not making payments, and they can affect your credit rating. The latter issue was supposed not to be a concern, but only time will tell if this is the case. It’s certainly impossible to hide the fact that you’ve taken one as it will be very visible on bank statements and application forms in future.
The situation on the major areas is as follows:
Apply before the deadline and any agreed payment holiday will last three months. It may be possible to extend an existing holiday if you need to, but the decision is up to your lender.
Credit cards and loans
Apply before the deadline and any agreed payment holiday will last three months. It may be possible to extend an existing holiday if you need to, but the decision is up to your lender. The interest payable on these will be far higher so be sure that you need to do it before you do!
Can you extend any payment holiday on your mortgage to cover the credit card payments? This would be a cheaper option.
Banks were obliged to give the first £500 of an overdraft without interest charges until the 31st October 2020. This is, in many cases, only available to those that ask for it so please do!
The huge increase in banks overdraft rates that was planned for April 2020 was deferred, but over the last few months some banks have been imposing the new rates. If you are struggling as a result of the pandemic, you can get this rate reduced, as the FCA said that ‘no-one struggling from the pandemic should pay more’.
As we’ve mentioned previously, the FCA also issued guidance to the car finance market, prohibiting them from repossessing cars for non-payment until 31st October, and encouraging a ‘flexible’ approach to borrowers. If you need one, you should still be able to apply for a holiday or an extension to an existing one.
Martin Lewis suggests that if you know you need a payment holiday now, or in the very near future, you’re probably best to apply before the 31st October.
He bases this on the fact that the available support after the cut-off will be far less uniform, and will depend on your circumstances.
We’d definitely agree, as the conditions now are known, while from the 1st November, there is no clear guidance and you may not receive as much flexibility. Any payment changes after 1st November will also appear on your credit rating.
If you’re unsure of the best route for you, please get in touch, but don’t delay for too long!