Finance News

A quarter of borrowers who accessed payment deferrals have missed further repayments

Rozi Jones
|
8th April 2021
house mortgage late payment due repossession arrears
"A year into the pandemic, many households’ coping mechanisms are exhausted and the temporary support measures that have kept them afloat are slowly being withdrawn."

A year on from the start of the pandemic, new research from StepChange Debt Charity reveals nearly a quarter (23%) of the 1.6m people who’ve accessed credit payment deferrals have subsequently missed repayments, while half (50%) say they have resumed repayments but with difficulty.

Since last week, people struggling financially as a result of Covid can no longer apply for the standard payment deferrals put in place as temporary support measures.

However, StepChange is warning that millions are still struggling financially, redundancies and unemployment are looming and "the long tail of debt problems shows little sign of abating".

StepChange’s report, Stormy Weather, found that nearly 80% of those whose income has been hit by Covid have not recovered financially. The charity estimates more than 14 million people have suffered a hit to their income which has affected their ability to pay for essential costs since March 2020. As of January this year, 11 million of those affected said they were still struggling to meet those costs.

StepChange estimates £25bn of arrears and borrowing directly attributable to Covid has been built up since March 2020, with 10.6 million people having borrowed to make ends meet. Most worryingly, 2.8 million people have used high-cost credit to make ends meet in this period.

Additionally, nearly half (45%) of those who started receiving Universal Credit after March 2020 have experienced hardship, while six in ten are showing signs of financial difficulty. Meanwhile, nearly half a million private renters have fallen behind on their rent since the start of the pandemic, accruing an estimated £370m in arrears.

StepChange is now calling on government and regulators to further measures in place to support households.

This includes helping renters struggling with arrears due to the pandemic stay in their homes. StepChange and has called for protections against eviction and a package of grants and interest-free loans to help people address rent arrears safely. The charity is also calling on the government to extend the £20 per week uplift to Universal Credit beyond September this year.

StepChange is also calling on the Government to amend council tax regulations to require councils to put in place affordable repayment plans for those experiencing difficulty before court and enforcement action are taken, taking vulnerability and financial circumstances into account and using exceptional funding to write-off debts where necessary.

StepChange CEO, Phil Andrew, said: “As the country continues to try returning to normal, there are millions of households still struggling with covid debt for whom ‘normal’ is a distant dream. A year into the pandemic, many households’ coping mechanisms are exhausted and the temporary support measures that have kept them afloat are slowly being withdrawn. Without urgent action to shore up the finances of the millions struggling to meet essential costs, Covid will cast a shadow over the economy for years to come.

“It is within the Government and regulators’ gift to support those hit hardest by the pandemic, but it will require coherent, long-term planning and financial backing. By implementing measures including the creation of an emergency financial package for renters, a permanent £20 uplift to Universal Credit and new packages of targeted support to help people address Covid-related arrears and debt affordably, we can reduce the risk of financial long Covid for households across the country.”

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