Four hidden ways the Covid crash is hitting your wallet

You knew about the job losses, the end of furlough schemes, payment holidays and even MOT reprieves. But that’s far from the whole story

Closed-down shops will become a common sight as businesses struggle (Getty)

It hasn’t been easy keeping on top of what felt like a daily flurry of changes, announcements and breaks that made a huge difference to our personal money matters in the early days of the pandemic crisis.

But now, as the support measures are being drawn back to reveal the true nature of the Covid crash, the impact is starting to ripple outward in ways you might not even realise. Here are just a few of them.

Borrowing money is harder

When times get tight, so does lending criteria as lenders batten down the hatches in preparation for an economic storm. It is now much harder to get a mortgage with a small deposit, especially as credit card companies have dramatically reduced credit limits and interest-free periods have shrivelled up.

Unless you are the perfect lending candidate, the chances of securing any kind of loan have got distinctly smaller. And experts warn that despite some small improvements in the number of products available, things aren’t about to get any easier.

“Since we were hit by the Covid crunch, lending has dried up faster than it did during the financial crisis – and things are only going to get worse,” warns Sarah Coles, personal finance analyst for Hargreaves Lansdown.

“In the following three months, life is going to get even tougher for borrowers. Lending will be even harder to come by, and at the same time, the end of lockdown means demand is going to rebound. So more people are going to be left struggling to find the lending they need.”

It means you’re more likely to need a Plan B, Coles adds. In a world where it’s harder to borrow cheaply to make ends meet, it’s essential to put together a budget to help you balance your income and spending.

“Where your income has fallen, this is going to be a painful process of cuts,” she says. “However, it’s far better to face the pain now, than wait until you have a debt problem on top of everything else.”

You’re even more likely to get scammed

Fraudsters often use the latest news developments to lure investors into scams. The world has changed in unprecedented ways in the last few months and while it has brought out the best in humanity in many ways, as with any crisis it can also attract the worst in some.

“Some scammers have impersonated the World Health Organisation, while others have masqueraded as health authorities in other countries,” warns Ben Faulkner, director at financial planner EQ Investors.

“These scams take many forms and could be about insurance policies, pensions transfers, or high-return investment opportunities, including investments in coronavirus treatments.

Scammers are sophisticated, opportunistic and will try many things to persuade you to disclose personal or financial information or click on links that may contain malware.

In fact, one in every five people have received emails, texts, phone calls and/or other suspicious communications that mention coronavirus, according to figures from Aviva. That could mean 12 million people have been targeted.

The warning comes too late for one in twelve of us who have been caught out and scammed by Covid-related material, with most victims reporting that the fraudsters pretended to be from a company they already deal with.

Your bills could rise

If you lose your job your risk profile changes so costs like insurance could rise as the provider reassesses your circumstances. It could mean a double whammy – losing your income and then being faced with rising bills you can’t pay because of it.

With new economic projections from the Office for Budget Responsibility (OBR) indicating that an another 2.7 million people could be made redundant by Christmas, insurance comparison platform Quotezone.co.uk has warned that unemployed drivers could end up paying an average of 30 per cent more for their car insurance than an employed driver because their risk profile has changed.

Drivers have a contractual obligation to inform their car insurance providers if they have been made redundant though, and failure to update your insurer could mean your cover is invalided.

You make weird spending decisions

This has already been a polarised experience for millions of Britons. Some have saved a fortune, others have been catapulted straight into financial hardship.

But don’t make the mistake of assuming that your spending decisions – whichever camp you fall into – are unaffected.

“Under usual circumstances, many of us think of savings and making financial decisions as a chore rather than something we enjoy, and at present, it is likely that we find ourselves even more stressed out about our financial lives than we have been previously,” says Beatrice Widmark, method researcher at financial wellbeing app, Dreams.

When faced with a spending decision, stressed consumers will pay for necessities they think will help restore control rather than splurge on non-necessities. Just think of all that toilet roll stockpiling in the early days. Our inclination to have a steady supply of household essentials can become a way to regain a sense of control in uncertain times.

“Conflicting desires to stock up on essentials, purchase things to make life at home easier, and to make use of this downtime to save, can cause us to feel anxious about managing our finances,” Widmark adds.

“Humans are irrational by nature and our feelings, cognitive biases and mental heuristics will always be involved in our decision-making. So instead of trying to thwart any feelings of anxiety, and probably feel like a failure when it’s not working, we can accept that our biases and emotions are at play and find ways to work with them to make more financially sound decisions.”

Think about why you want to save or spend, rather than worrying about how you are going to achieve it in the first instance, she suggests.

“By examining your feelings about your finances, you may be able to get to the root of your anxiety and address your emotions in a way that allows for a balanced approach.”