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By John Penberthy-Smith

Chief Commercial Officer, Saffron Building Society


Furlough phase out – what to do if you can’t pay your mortgage

As furlough support has begun to phase away from July 1 2021, there is still concern that this could lead to redundancies as businesses begin to feel the pinch.

Having been badly affected by covid restrictions, the hospitality, live music, and theatre scenes have been, on balance, been the most affected.

Nobody at this stage knows the impact of redundancies and a reduction in working hours as businesses cut costs to counter the lesser support.


Below are a few points of discussion for those who may find themselves in financial difficulty over the coming weeks and months.

·       Be honest with your lender: Most respectable lenders will prefer you to contact them to let them know your situation has changed. At Saffron Building Society we work with our members on a case-by-case basis to assess their situation and work together to find a solution and plan of action, specific to the borrower.

·       Check your insurance: Do you have mortgage payment protection insurance? If you check your insurance, you should be covered for redundancy and may be able to make a claim.

·       Beware of Mortgage Holidays: Lenders describe them in different ways, but you can have a six-month break from payment with most lenders. This is a short-term fix, but it does extend the lifetime of the mortgage and can have implications on your finances moving forward, for a longer term.

·       Claim benefits: Do not be embarrassed to claim all the benefits you deserve. Although this may not be enough to cover the cost of your mortgage, it will ensure you and your family are able to survive in the short term.

·       SMI: The government mortgage interest support scheme, known as Support for Mortgage Interest. It takes up to 39 weeks for the first payment, or nine cycles of Universal Credit (9 months). It will cover mortgage interest payments, up to a total of £200,000 (£100,000 if on pension credit). Payments are made directly to your lender, so worth investigating.

·       Cut your budget: Inevitably you are going to have to cut back on spending and manage the household budget in a different way. Cut energy bills, look for better tariffs. For the short term, can you reduce your mobile phone bill payment, if you have internet at home, why pay for costly mobile data? Manage your supermarket bill and look for fun, free ideas to keep the kids entertained, especially with school holidays approaching.

·       Temporary work: There is still temporary work available and could be a lifeline to keep you on your feet. Construction output remains at a high, so are the opportunities for labour or groundworks? Could you provide support to offices on a freelance or day-by-day basis for businesses who need support.

·       Ask for help: Do not be afraid to speak to loved ones. Perhaps pop into a local branch of your lender and have a financial wellbeing conversation – at Saffron Building Society we provide these for free for our members, I am sure other lenders will do the same. If you feel like you could be in a worsening situation, speak to debt charities such as StepChange or National Debtline.

·       Leave your emotions at the door: You have nothing to be scared or embarrassed about. As Brits we are naturally very prudish when it comes to discussing our finances. Everyone has hit a bump in the road or found themselves in a situation where they want to bury their head in the sand and hide. But the best thing you can do is hold your head high, get all the support you can and be open and honest. In the long term, this will get your through this situation in the fastest possible time.

*John Penberthy-Smith is Chief Commercial Officer at Saffron Building Society


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