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iam|FINANCIAL - Coronavirus pandemic financial update

iam|FINANCIAL Coronavirus (COVID-19) financial update

Firstly we would like to wish everyone well on behalf of the whole team at iam|FINANCIAL. We’re in the midst of some very strange and unprecedented times which will have a dramatic impact on our finances. Last week we saw some drastic measures outlined by the Chancellor, Rishi Sunak, which aims to ease the financial burden many of us will encounter over the coming weeks and months.

We are continuing to work hard through this period to make sure that we are constantly available to answer any of your questions and concerns. You can contact iam|INSURED by email, telephone or via any of our various Social Media channels such as Facebook, Twitter, Instagram or Linkedin.

Here is a summary of some of the key points that may be of interest to some of you and how the current Coronavirus (COVID-19) situation is affecting us. We wanted to explain the main areas covered in the latest announcements as well as some of the affects that we are seeing on the various products that we offer.

The government last week announced a number of major schemes to help to support UK businesses and citizens over the coming weeks / months. It is becoming clear that people are not going to be able to work in the same way throughout the outbreak and that businesses will be dramatically impacted. These reforms are designed to help people through this incredibly difficult period to keep their jobs and continue to earn an income.

Our Director and Tax Expert, Caroline Sharpe-Szunko has highlighted some of the key points which may affect each of our customers and followers.

  • The government has brought in special measures to provide financial support for the self-employed and those on low income if they fall ill. They will be able to claim employment and support allowance (ESA) and / or Universal Credit
  • The Universal Credit standard allowance will be increased by £1,000 per year for the next 12 months meaning that someone who is self-employed can receive the same amount as someone receiving SSP
  • The Working Tax Credit basic element will also be boosted by £1,000 per year for the next 12 months 
  • SSP will be covered from day one when you are unable to work due to the Corona Virus. Employers are able to claim back 14 days of SSP from the government per employee
  • The corona virus job retention scheme has been set up to encourage employers to offer staff a leave of absence rather than to make them redundant when their job is at risk due to the current pandemic. As part of this scheme the government will pay up to 80% of the employee’s salary capped at £2.5k each month.  
  • Deferment of both VAT and income tax payments have been brought in along with a specific HMRC helpline being set up to assist businesses and individuals who need to request time to pay arrangements for their taxes
  • Grants are being paid to businesses in retail hospitality and leisure and small businesses who pay little or no business rates 
  • Corona Business Interruption Loan Scheme will launch early next week for small and medium sized businesses offering the first 12 months as interest free and the government giving 80% guarantee for the loans. All major banks will be offering the scheme

We will be updating these key points as things develop to try to keep everyone informed about the developments.

The government also issued a statement last week to help households to manage their finances during the next several months as we move through the Coronavirus pandemic, this offered payment holidays to borrowers in the UK.

The payment holidays will be up to 3 months for mortgage borrowers in the UK to help ease the financial burdens of owning a property in these difficult times. The ruling was also extended to private landlords a few days later in an attempt to pass these savings on to renters who may also struggle to meet their monthly outgoings.

The statement told banks that they were no longer allowed to levy fees to borrowers for payment holidays and these should be allowed without any penalties. Another key part of the statement said that lenders would not be allowed to pursue any evictions or repossessions during this period resulting from mortgage arrears.

We believe that there are currently major problems with the banks being able to deal with demand with telephone queues of well over 3 hours being reported.

Ultimately we will no doubt see some dramatic changes in the mortgage and housing markets over the coming weeks and months, potentially even years. Some lenders have been quick to react to the current crisis by withdrawing a number of deals from their lending portfolios which are mainly Base Rate Tracker deals

We are in regular contact with all of our mortgage partners by email and telephone so we’re constantly being updated on what deals will be going and what will remain. The expectations are that some lenders will restrict lending over the coming months until the dust has settled in terms of the affects of the Coronavirus pandemic.

We have been in similar situations in the past where large numbers of mortgage deals have been removed from the UK’s mortgage market. Generally this contraction of mortgage deals will last for a period of time until lenders feel comfortable and confident in their ability to lend again.

Some of the deals which may be impacted are:

Base rate trackers
Discount rate mortgages
Long term fixed rates

For more information about your mortgage deal or rate then you can contact iam|MORTGAGES on 01244 732894.

The Bank of England’s Monetary Policy Committee (MPC) was quick to react to the crisis with a reduction of the base rate down to 0.25%. This was then fairly quickly followed by a further drop down to the current rate of 0.1% which is close to the lowest rate we have ever seen in the UK during the previous recession in 2007/2008.

Anyone who currently has a Base Rate Tracker mortgage will almost instantly see a reduction in their mortgage rate which will mean lower mortgage payments. Depending on how large your mortgage will have a direct impact on how much your monthly payments will drop by, larger mortgages will of course drop more than lower mortgage balances.

Those mortgage borrowers with a Standard Variable Rate (SVR) or Discounted mortgage will probably see the rates reduce over the coming months if their lender decides to pass these changes on.

People with a Fixed Rate mortgage will not see any change to their mortgage payments because their rates are fixed for a period of time. Once they come out of the fixed rate, depending on what the interest rate is at the time, they may have a slightly reduced amount to pay each month.

We are still processing new and existing mortgage applications so there is still plenty of activity in the mortgage market. We also know that mortgage lenders are seeing an influx of calls from existing customers requesting to defer payments with the now allowable ‘mortgage holidays’ being offered by the government. It may be that there are delays in applications being processed over the coming weeks and months.

The effects of Coronavirus on the UK economy could be far reaching but as yet we can’t be certain what that will be and when. It is possible that there may be restrictions applied to new mortgage applications at some point in the future or the government may have to intervene as it did in 2007 and during previous periods of difficulty.

Currently as long as your application supports the mortgage being requested then you should not experience any problems for the time being. We will continue to keep everyone updated in terms of what’s happening across the mortgage market in the UK and do what we can to assist people with any enquiries or requirements.

There are a number of insurance companies who have already withdrawn their unemployment cover, such as Legal & General. We would expect that the vast majority if not all of these products will be withdrawn over the coming days and weeks.

This type of cover has become far more expensive and far more restrictive since the last recession in 2007/2008. We are expecting that this type of product will become even more expensive and restrictive, even if it becomes available again at all in the foreseeable future.

Anyone who holds a life insurance policy currently in the UK with any insurer will not be affected by the Coronavirus pandemic. All terms already underwritten will remain the same and should have no impact on future claims whether or not they are connected to Coronavirus (COVID-19).

Also for those people with a pre-existing medical condition who hold a life insurance policy that is live, there should be no impact. Your life insurance policy will have been underwritten at the point that you applied for it so again you should have no issues with any claims in the future.

If you have any concerns about your existing cover then you should contact your existing insurance provider for clarification.

Any existing critical illness cover policy terms will remain the same as they have already been offered and claims should be paid on that basis. Also, if you unfortunately have to claim on your critical illness cover policy as a result of something connected to Coronavirus which is covered under your existing cover then you should be paid out.

There could be some potential health related issues connected to Coronavirus that could cause future medical problems which will be covered by critical illness cover. The current information however does not suggest that COVID-19 will cause severe long lasting health problems for the majority of us so these claims would be rare.

If you hold a current income protection policy to cover your household bills then you should also find that there is no difference to your existing policy. Any claims arising from Coronavirus related illness or non-Coronavirus related claims should be paid from the vast majority of insurance providers.

There are some insurance providers who has stated that they will not pay out immediate claims (e.g. Day 1) if they are as a result of contracting Coronavirus. You should check your policy terms to see what deferred period (e.g. Day 1, 2 weeks, 4 weeks, 8 weeks, 12 weeks etc.) that your policy covers you for.

If you hold a current income protection policy and you want more clarification about whether your cover has been affected then you should check your insurance providers website or contact them directly.

It is natural to think about protection at times like this and we’re seeing a number of people wanting to put something in place to protect their loved ones if anything happens to them.

We are already seeing additional questions being applied to various insurance provider websites related to Coronavirus which are having an impact on new applications. Insurance providers are becoming increasingly cautious about offering cover to anyone who has been tested positive for COVID-19, experiencing symptoms or who has been exposed to the risks of contracting the virus.

Some of the additional questions that we are seeing are:

  • Have any of the following applied to you? I’ve tested positive for Coronavirus / I’ve been advised to self-isolate / I’ve had a new, continuous cough and/or high temperature / I’ve had direct contact with someone who’s been confirmed or suspected to have Coronavirus
  • Have any of the following applied to you? I’ve had a negative test for Coronavirus / I’ve not been told to take a test for Coronavirus
  • When were your last symptoms?
  • When were you last in self-isolation?
  • Are you fully recovered?

If you answer ‘yes’ to any of the questions relating to Coronavirus then you will generally find that any offer of cover will be postponed. This means that the insurance provider will re-assess your application after a period of time (usually several months) to make sure that there are no health problems connected to the virus.

Here’s what we’re seeing when it comes to applications for life insurance, critical illness cover and income protection requiring additional medical evidence.

Medicals: Firstly you may be asked to complete a nurse screen or a medical test as part of your life insurance application. We are not yet certain what will happen for these cases as clearly the risks of a nurse visiting you at home or at work are too high. Also we assume that all nurses are incredibly busy with essential NHS work at the moment so it’s not practical for them to be carrying out home visits.

We will be speaking to insurers on a daily basis over the coming weeks and months to prevent blockages. We are also working with insurers to ensure that we do whatever we can to avoid having requesting medicals unnecessarily.

GP reports: It is true that there are severe disruptions across all of the health service which could have an impact on the speed that they are able to respond to insurance report requests. Some surgeries are also closed temporarily so this could have an affect on whether your medical report will be returned.

We are also asking insurers to avoid requesting GP reports for assessing life insurance applications where possible.

Unfortunately some insurance providers have reduced the levels of acceptance for automatic underwriting which is not good for this situation. We as a business are trying to avoid using these companies temporarily where possible to give our clients the best possible chance of getting the cover that they need.

We are currently speaking to a number of the major insurance providers in the UK to help our clients if they are struggling to pay their premiums. The very last thing that we want to happen is for people to lose their cover, especially during this period, because they can’t afford it.

We are hoping that some or all of the insurance providers will offer a similar feature to the mortgage market and allow payment holidays for a period of time. The main issue with stopping paying your premiums and losing your cover is that you may not be able to get the same cover again or even get cover at all depending on your circumstances.

If you’re struggling to pay your monthly life insurance premiums then you should contact our team at iam|INSURED and we’ll do what we can to help you.