Should we be taking out emergency cash? Are we really saving money at the moment? How will coronavirus affect the housing market? A money expert answers five personal finance questions asked by Stylist.
Updated on Friday 27 March
The amount of ways that the coronavirus pandemic affects our way of living is, quite frankly, overwhelming. People across the country have found themselves in unemployment. Emergency legislation has been put in place to protect private renters. And parents who aren’t key workers are having to homeschool their children, often while also working from home.
These examples only scratch the surface of how coronavirus is affecting our economy and society. There are hundreds of questions to be asked, and it looks like we’re going to have to wait for things to develop in order to find the answers – because things really are changing every day.
We’re all searching for clarity on what this all means for our personal finances. And the big question is: are we headed for a recession?
According to BBC economics editor Faisal Islam, “we are in a recession already, as is most of the coronavirus-afflicted developed world”. When Stylist put this to Salman Haqqi, a personal finance expert at money.co.uk, he said he didn’t want to comment at this particular stage.
But Haqqi did help give clearer answers for these money questions.
1. We’re already living in a housing crisis – how will the coronavirus affect buying or renting a property in the future?
On Thursday 26 March, the government announced that it is freezing the housing market until the coronavirus restrictions are over. It said there is no need for buyers and sellers to pull out of transactions, but both parties should try to agree a new date unless the property is empty. And it said banks have agreed that mortgage offers should be extended where delay to completions takes place.
Renters have also been advised not to move by the government, which also banned any evictions for the next three months from Friday (27 March) in England and Wales.
Speaking to Stylist before the announcement was made, Haqqi explained the future of the housing market, saying: “While UK house prices may not go unscathed, experience tells us that the housing market can be surprisingly resilient. The truth, however, is that nobody knows how this will affect house prices yet.”
Referring to a potential freeze, he added: “A short-term wobble is only to be expected, but this will hopefully be short-lived.”
2. What advice do you have for self-employed people who are affected by the coronavirus pandemic?
On Thursday 26 March, the government also announced that self-employed workers can apply for a grant worth 80% of their average monthly profits to help them cope with the financial impact of coronavirus. The money, which is up to a maximum of £2,500 a month, will be paid in a single lump sum, but will not begin to arrive until the start of June at the earliest.
Haqqi outlined the other benefits available to self-employed people, saying: “Right now, if you’re self-employed, you won’t need to pay your Self Assessment Income Tax bill due in July 2020 until January 2021.
“You get more time if you’re VAT-registered, too – VAT payments are being deferred for three months, from 20 March 2020 until 30 June 2020.
“If you are self-employed, or earning less than £118 per week, you are not entitled to sick pay. However, if you have contracted coronavirus or are advised to stay at home, the government has made it easier to make a claim for Universal Credit or new style Employment and Support Allowance.
“If you are eligible for new style Employment and Support Allowance, it will now be payable from day one of sickness, rather than day eight, if you have Covid-19 or are advised to stay at home.
“The UK government has also removed the minimum income requirement for Universal Credit. In normal situations, the entitlement to Universal Credit would be calculated based on how much you earn in a month.
“But keep an eye on the news daily as the situation is fluid and many commentators expect the government to issue new guidance and help for those who are self employed or freelance in the coming days.”
3. It feels like we’re saving money at the moment – but is this a false way of thinking?
“While we might be spending less on holidays, commuting and non-essential shopping it is wise to be cautious in uncertain times like these.”
“We still don’t know the full ramifications of the Covid-19 pandemic on the nation’s personal finances. So, until it becomes clearer it is better to err on the side of caution with our hard-earned pay, save it or use it to pay off existing debts.”
4. What advice do you have for people who are spending in their overdrafts and have credit card debts during this time?
According to Money Saving Expert, First Direct and HSBC are offering credit card payment holidays. Credit card rates are mostly unaffected by the UK rate change. And most banks and card firms will allow emergency credit limit increases. You can find more information here.
If you’re worried about paying off your credit card during this time, Haqqi shared advice and tips, saying: “Paying interest on debt is one area many people are spending money when they don’t need to be. If you are paying off existing debt on a credit card that’s charging you interest, you can avoid paying another penny more by shifting it to a 0% balance transfer credit card.
“If you don’t have debt but are planning to spend on a credit card, a 0% purchase card lets you spread the cost of your spending over a number of months, interest-free.
“Another simple way to avoid paying interest on your credit cards is to make sure you always clear your credit card balance in full at the end of every month. You won’t be charged interest and, if you have a cashback [card], you’ll get something back.
“There are a number of banks offering cashback for switching your current account. It’s free cash but does come with stipulations, so make sure you always read the small print.”
5. People are taking emergency amounts of cash out at ATMs – should we be doing the same?
“Stockpiling cash because you’re worried that it could somehow run out is not a good idea. Banks are flush with cash. And in the event that they run out of certain notes temporarily, they can quickly restock what’s missing.
“Though the economy may seem somewhat bleak right now, consumers should remember not to panic.”