Data from the Financial Conduct Authority shows that almost one in three (31%) of UK households have experienced a reduction in income as a result of the coronavirus pandemic. Amongst affected households, the average income reduction is approximately 25%.
12 million adults are now struggling to pay their bills, a rise of two million since Covid-19 first struck the UK in February of this year.
The financial effects of the virus have also hit certain groups harder than others. 37% of adults from black and ethnic minority backgrounds reported a reduction in income. Those in the 25 to 34 age group were most likely to report that Covid-19 had forced them into a change of employment – perhaps not surprising when one considers that younger people comprise the bulk of the workforce in hospitality and leisure. The 25-34 age group are ten times more likely to require debt advice than those aged 55-64.
Things may, of course, be set to get worse as well, with more job losses on the horizon as more areas of the UK are placed into the higher tiers of coronavirus restrictions and more premises are forced to close.
The FCA surveyed 7,000 consumers during July 2020. On publishing these results, the regulator took the opportunity to remind consumers that they should approach their lenders for support if they are struggling to meet their repayment obligations, and that lenders have been asked to provide tailored support to borrowers who continue to experience financial difficulty.
The regulator suggests that forbearance options lenders might offer to individual borrowers include:
- Extending the term of the mortgage
- Re-structuring the mortgage
- Offering reduced payments for a period of time
- Offering a period where the borrower does not have to make any payments
- Referring the borrower to appropriate sources of advice and guidance
Any additional support a lender decides to offer would be reflected on the borrower’s credit report in the usual way. Lenders must make it clear to borrowers what the likely impact on their credit report is when they offer any forbearance.
Borrowers who are at the greatest risk of harm, or who are in severe financial difficulty, should be treated as priority customers by their lenders.
The FCA adds that an example of fair treatment would be not re-possessing someone’s home if the local lockdown situation in their local area might make it difficult for them to find somewhere else to live.
However, if customers are in a position to resume repayments, it is likely to be in their best interests to do so.
Sheldon Mills, Interim Executive Director of Strategy and Competition at the FCA, said:
“We want to remind consumers, especially those who are newly in financial difficulty, that lenders are able to provide you with support. There are options available to you which will reflect the uncertainties and challenges that many customers will face in the coming months. It is also important that households in serious financial difficulty seek debt advice for support.
“We understand that many people will continue to live in financial uncertainty as the impact of coronavirus continues. Our surveys have shown that younger and BAME consumers have been impacted more than others, with a large amount of the population already having seen significant changes to their financial stability since the start of the pandemic.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed by Scott Robertand as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.