How coronavirus can affect your insurance, energy bills and mortgage
How coronavirus can affect your insurance, energy bills and mortgage
comparethemarket.com publishes a comprehensive guide to help consumers navigate their finances
and save money during COVID-19
13 May 2020 – The outbreak of coronavirus has already led to many changes in everyone’s day-to-day lives. As more announcements arrive daily from banks, insurers and the providers behind household bills, many people will be thinking about how they can save money during this period and maintain their household’s financial wellbeing. Recent analysis from comparethemarket.com also indicates that, despite the new Coronavirus Job Retention Scheme saving millions of jobs, the scheme will mean that people on an average UK salary will receive just over £500 less than their usual monthly payment.
As the COVID-19 pandemic starts to affect our personal finances, comparethemarket.com has compiled some suggestions on how to reduce day to day costs.
- By switching motor insurance online, individuals can achieve an average saving of £282.
- If you are no longer commuting and are likely to be working from home for the foreseeable future, it is possible that your provider could reduce your premium – with the chance of a reduction more likely if this is a long-term, rather than a short-term, change. Equally, it is worth telling your provider if you no longer expect to use your vehicle as much as you normally would, as a reduction to your anticipated annual mileage could also positively affect your premium.
- Where you keep your car during the day could impact your insurance policy. If you’re not going to be using your car and you want to keep it somewhere different to the place specified on your insurance policy (for instance, moving it from the street to a garage) you should let your insurance provider know. If it is a long-term change in circumstance, storing your car off the street could reduce your risk profile and potentially reduce your premium.
- Although many cars will be idle over the next few months, motor insurance remains a must-have for owners. If your car is parked on the road, it remains illegal to not have insurance. The only way to remove the legal requirement of having your car insured is to declare a vehicle off-road – but this requires a private, off-road parking space.
- In the current environment, some providers are waiving fees that may ordinarily be charged for cancelling or changing your policy. It is worth checking with your provider to clarify what – if anything – has changed.
- Customers who switch their buildings and contents insurance can save up to £105 on average when shopping around for a better, more comprehensive deal.
- In normal circumstances you would need to inform your home insurance provider that you are working from home regularly. However, the Financial Conduct Authority has told insurers that it expects them to treat customers fairly and not to penalise a customer’s ability to claim over circumstances they have little control over. The main instance where you would need to inform your insurance provider is if you’re receiving business visitors to your home during the current crisis.
- If you are planning on carrying out any DIY when at home, be sure to check the terms and conditions of your current home insurance policy to see if you will be covered in the event of an accident. Many home insurance policies include cover for accidental damage, such as spilling paint on the carpet. However, this is often an add-on cost, so make sure to read the T&Cs carefully before beginning any home improvements. Similarly, for self-employed workers keeping business equipment at home, it is worth double-checking your policy to ensure that you have adequate protection in place.
- Switching between an energy supplier’s variable tariff and a more competitive fixed rate tariff can save individuals on average £363. There are approximately 15 million customers on energy suppliers’ variable tariffs. For the average consumption household, the difference between the cheapest dual-fuel fixed-term tariff currently on the market and the energy price cap is more than £350* (WoM figures)
- With millions of people now in lockdown and working from home, energy usage is likely to increase. comparethemarket.com found that 76% of people are already engaging in reducing energy sapping activities. Here are a few of our top tips for reducing energy consumption while in lockdown:
o Turn off your TV and computers rather than leaving on standby, especially overnight
o Replace older lightbulbs with energy efficient bulbs, and turn lights off whenever possible
o Lower the thermostat level on your heating, and consider turning the heating off in lesser-used rooms
o Unplug all appliances when not in use
o Don’t overfill the kettle: only use as much as you need
o Wash your dishes by hand rather than using the dishwasher
- Many great value deals are only applicable for the first 12-18 months before people are then automatically charged more for their package. According to Ofcom, 25,000 broadband customers come to the end of their contract everyday – and this usually leads to an automatic price rise. As such, keep a close eye on when your current contract comes to an end, and shop around online and switch to a new deal which provides a fast speed for an affordable price.
- Ofcom suggests that out-of-contract broadband customers could save an average of around £100 a year by agreeing a new deal with their existing provider or switching to a new one.
- If your fixed rate is coming to an end soon, it may be a good idea to switch onto a new deal rather than rolling onto a standard variable rate (SVR). While there are fewer mortgage products available than usual, and physical property valuations are currently on hold, some remortgages are still able to take place.
- According to the latest Bank of England data, the difference between the average SVR rate and two-year fix is 2.78%. This could mean a saving of hundreds of pounds for many homeowners*, a saving which is likely to far exceed any fees charged by the provider.
|Average rate||4.26% (BoE data, Feb 2020)||1.48% (BoE data, Feb 2020)|
|Approx. monthly repayments||£669||£467|
|Total monthly saving:||£202|
- If you’re struggling to meet mortgage payments at this time, the government and FCA has agreed with mortgage lenders to offer three-month repayment holidays to households facing difficulties because of the coronavirus pandemic. It is strongly recommended that you only apply for a mortgage holiday if you need it, as you will still be expected to pay back the amount at a later date. Interest will still be charged on what you owe, and the remaining payments will be added onto the remaining mortgage term.
- In the current environment, people may be more inclined to take on debt to manage short-term cashflow issues. While the FCA has offered temporary financial relief on overdraft fees, consumers may be surprised that going into their overdraft can be expensive.
- There are other solutions available to manage debt in a responsible way. With a 0% APR credit card, individuals do not have to pay back any interest. However, such attractive introductory rates are typically only valid for a fixed period – 18 months, for example – before a higher APR rating comes into effect. If you’re planning to borrow over a longer period of time, a loan could work out cheaper than an overdraft as the interest charges won’t be as high.
- Borrowers should ensure they only borrow what they can repay and use soft eligibility credit card checkers and loan checkers to prevent damaging their credit score.
Anna McEntee, product director at comparethemarket.com, comments:
“During this uncertain time, many people are looking for practical ways to manage their finances and save money, especially those worried about the possibility that their outgoings may increase over the coming months. You may be surprised by how much money you can save with a few simple changes and switches. We encourage everyone to take control of what is within their power and review their household costs. It takes minutes rather than hours to potentially shave hundreds of pounds off your annual household bill spend.”
Notes to editors
*Average mortgage debt of over £135,000
- FCA: Outstanding value of all residential mortgage loans was £1.486 billion in 2019 Q3
- Finder: 10.94 million outstanding mortgages in the UK (May 2019)
- £1,451 billion / 11.1 million mortgages equals average mortgage debt of £135,832 per household
- Costs have been calculated via Nationwide based on mortgage term of 30 years: Mortgage payment calculator
- These figures represent the average rate in February 2020. This rate is liable to change over time given potential fluctuations in the Bank of England’s interest rate.
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