Covid-19 hit the finances of ethnic minorities and young people the most, according to research from the City regulator.
The Financial Conduct Authority (FCA) carried out a survey of more than 7,000 people in July. It found that nearly a third (31%) of people have seen a decrease in income, with households seeing income fall by a quarter, on average.
Those from a Black and Minority Ethnic (BAME) background were more likely to be affected, with 37% of BAME adults taking an income hit.
BAME adults are particularly likely to have seen their working hours reduced, while people aged between 25 and 34 are the most likely by far to have had a change in employment as a result of the pandemic, the FCA found.
The research also found that:
– 36% of people who already had low financial resilience and had a mortgage said they are likely to fall behind on mortgage payments.
– The same proportion (36%) of those with loans or credit cards are worried about repayments on these.
– More than two-fifths (42%) of renters are worried about falling behind on rent payments.
On the other hand the FCA said two million people who were not financially resilient had become so since February.
The regulator is reminding people that help is still available from lenders if they are finding it hard to keep up with their payments due to coronavirus.
— Financial Conduct Authority (@TheFCA) October 20, 2020
It also said it recognises that the increasing number of coronavirus-related restrictions placed on some areas of the UK may lead to increased financial difficulties for some people.
Blanket support has been made available to people struggling with debts such as mortgages, personal loans and overdrafts.
From October 31, lenders will be offering support on a more tailored basis than before as those who no longer need support resume their normal payments.
The FCA said this support will take local restrictions into account.
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 the 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 FCA has said it expects firms to work with their customers to provide support before they miss payments.
Given that people may be impacted in different ways, firms should be flexible and offer a full range of shorter and longer-term options which reflect individual circumstances.
This could include suspending, reducing, waiving or cancelling any further interest or charges. It could also include permitting the customer to make no or reduced payments or agreeing a repayment plan.
Firms should also treat customers fairly – for example by not repossessing someone’s home when they are in lockdown and have no access to alternative accommodation.
For borrowers who have already had payment holidays, firms should offer a range of options for how the missed payments will be repaid.
As well as firms playing their role, customers also need to do their bit by being as transparent as possible with their lender so that they get the appropriate support, the regulator said.
They also need to bear in mind that payment holidays can cost more in the longer term as interest will likely still build up.
New support given after October could also have implications for people’s credit files and firms should also be clear about this with customers.
People trying to get their finances back on track can find more information about payment holidays and budgeting at fca.org.uk/consumers/dealing-financial-difficulties-coronavirus