Will temporary payment holidays create the perfect debt storm for households?
Government organisations, such as the Financial Conduct Authority (FCA), are working with Banks and lenders to try and alleviate some of the financial demands on households as many of us sit it out at home during the coronavirus pandemic
However, Banks and mortgage lenders are trying to discourage customers from taking advantage of a government offer of mortgage “holidays”, warning that unclear advice from the chancellor and regulators risked pushing customers into more debt.
Three month payment break.
The Chancellor has announced that banks had agreed to give three-month payment breaks to anyone affected by the coronavirus pandemic, but lenders and trade body UK Finance are still pushing for better guidance on how to implement the pledge.
The chief executive of one mortgage lender said the Financial Conduct Authority’s existing advice,
“flies in the face of every bit of regulatory guidance ever . . . [customers] are just piling up more debt for later. We’re trying to tell people if you can make a payment, even half, that’s better for you. “
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Money is still owed and Interest still accrues under payment holidays.
Under a payment holiday, the money is still owed and interest continues to accrue, so if customers can still afford to pay something they should consider doing this. Any payment holiday, whether for mortgage payments, council tax or credit cards will still be payable at the end of the crisis. Some councils who are deferring council tax payments for 3 months have warned that future payments will be higher to make up the shortfall.
Debt Advisors expect unprecedented surge in demand for advice.
Good debt advisors, like Ramsey Lomax, who offer free and comprehensive advice understand what people are going through and are getting ready to help those people who will be struggling with debt and suffering financial stress and anxiety.
Debt advisors and debt providers have warned There may be unprecedented demand for help when all the financial relief for individuals affected by Covid-19 ends this year.
This was one of a few warnings from debt providers, who’re seeing spikes in calls, referrals and online enquiries.
Debt advisors are expecting a huge surge in demand for debt advice when the current temporary relief being offered by lenders comes to an end.
For people who were struggling with debts before the crisis, a delay in seeking advice will only exacerbate their problem.
or Credit Strategy for the last ten years.
Whilst for some the need for a payment holiday can be a welcome temporary relief, looking ahead to a world after coronavirus will cause financial stress and anxiety for many.
With millions of households already struggling to make ends meet before the crisis, the next few years could be even tougher. Availability of credit is already an issue for many working families living with poverty. It is unlikely to get any easier.
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