Student Advice COVID-19 banking update

There has been a lot of press coverage around government support for people in work, small businesses and Council Tax relief, but what are the banks doing to help relieve the pressure on our pockets and the wider economy?

Here are some of the key changes being implemented:

Interest  free overdrafts

Lloyds, Halifax, HSBC and Bank of Scotland are giving customers a £300 interest-free overdraft buffer. This means that if you have an arranged overdraft with any of these banks, you won’t be charged any interest on the first £300 of your overdraft.

HSBC is waiving all interest on overdrafts for the next 3 months and Lloyds, Halifax and the Bank of Scotland are doing the same for all current account customers with an arranged overdraft until 6th July which will be automatically applied (so no need to arrange this over the telephone)

Barclays is waiving all overdraft interest until the end of April which will automatically apply to all customers with an arranged overdraft, but this date may change if the lockdown is extended.

Money Facts has some more detailed independent advice around this issue.

If you do have a query or wish to speak about your account, use your online banking facility or mobile app as many branches are not open or have restricted opening hours.

Loans and credit cards

On 9th April The Financial Conduct Authority (FCA) has confirmed a payment freeze on personal debt such loans, credit cards, store cards and catalogue debts. There will be no financial penalty or charge associated with requesting this relief and it won’t affect your credit score.

The FCA has suggested that customers taking advantage of a 0% credit card deal should not be adversely affected so in theory if you do miss a payment, you shouldn’t lose that 0% deal, but please check with your lender.

Please note: interest will still be charged and if you are likely to accrue a large amount of interest, we advise you to maintain regular monthly payments if you can afford to and only consider this option as a last resort.

If you do have a query contact your lender.

Mortgages

If you are struggling to make your monthly payments, speak to your bank. On 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 the COVID-19 crisis (though it’s worth noting that this is a voluntary agreement with banks and not a compulsory instruction). You can read the FCA’s helpful guide about payment holidays for more information.

If you are going to apply for a mortgage holiday, we advise you to contact your lender through an online platform or web chat, as phone lines are likely to be very busy.

How would this work in practice? 

 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 an uplift in future payments.

It’s worth noting that if you take a mortgage holiday you WILL still be charged interest for the time you’re not making payments. But you won’t have to pay it back immediately – it’ll be added on to the total cost of your mortgage and factored into repayments when you start making them again.

MORTGAGE HOLIDAYS MUST BE AGREED WITH YOUR LENDER FIRST. DON’T JUST STOP THE PAYMENTS

Student Advice Service