The coronavirus pandemic is set to fundamentally change the way we live our lives. It’s an anxious and upsetting time, and while the primary concern is health, our financial wellbeing is also important. Many are worrying about losing their jobs, paying their mortgages and how sick pay and benefits will work. To help, we’re working flat out to answer your questions on these issues and much more.
Financial product help – mortgages, credit cards, overdrafts, savings..
The entire financial landscape has shifted due to the coronavirus. We’ve seen the Bank of England undertake economic shock therapy and reduce the UK base rate twice in just over a week, taking it from 0.75% to 0.1%, a record low. And that therapy is needed, with many people worried about how they will be able to afford to pay their bills or just afford to live. Let’s go through what you need to know, product by product…
Mortgages – cheaper rates, and three-month payment holidays if needed
The mortgage market has been totally shaken up – here’s how:
Mortgages are getting cheaper
Exactly what happens as a result of the base rate cut depends on what type of mortgage you have:
Tracker mortgages: Here you’ll get the full 0.65 percentage-point base-rate cut (from the two cuts combined), worth roughly £40/month per £100,000 of mortgage outstanding. Use our Mortgage Calculator to see exact savings.
Variable-rate mortgages: Here you should definitely see a cut, usually by the full 0.65 percentage points. See our lender-by-lender rate cuts table for amounts and timings.
Fixed-rate mortgages: If you’re on a fix, as the name suggests, your rate won’t change during the fixed period.
Rates for new mortgages, including fixes, are likely to drop over the next week, so check to see if you can get a cheaper deal on your existing mortgage. As Caroline tweeted: “@MartinSLewis thanks for the kick about mortgages – I’ve just saved almost £11,000 by changing to a fix for the next seven years.”
Three-month mortgage payment holidays are available for those who are struggling
If keeping up with your bills and food on the table may be a challenge, speak to your bank. On Tuesday 17 March, banks agreed with the Chancellor that they will offer ‘forbearance’ (tolerance and help) on mortgages.
This means they all should offer those struggling a three-month ‘holiday’, allowing customers a temporary break from having to make mortgage payments during this time. (Though it’s worth noting this is a voluntary agreement with banks – it isn’t compulsory for them to offer mortgage holidays.)
How would this work in practice? Again we await final confirmation, but here’s how it typically works. Let’s imagine you have 19 years and three months left on your mortgage. For the next three months you wouldn’t pay anything. Then when your mortgage repayments resume, the total you owe would be spread over the following 19 years – so you would see a very small uplift in future payments.