There is little doubt that the COVID-19 pandemic is the most damaging social and business issue in living memory, and certainly since the Second World War.  In terms of the damage that it is inflicting on a personal and business level, the 2008 crash doesn’t come close.  But while the business problems probably won’t be fully understood for some time – possibly years – how can we quantify the appalling impact that it is having on personal finance?

For a start, the Statista website reports that, by May, 31% of the UK population were reporting that they had been financially impacted by the COVID pandemic. But what is happening specifically, and it likely to continue?

First off, millions of people have experienced some level of pay cut over the last few months. It is estimated that more than nine million people in the UK have been off work but paid by the state to stay in their jobs, known as being placed on furlough. The government, to date, has paid 80% of these employees’ wages, every employer has had the opportunity to do this if they so wish or have the financial means to do it. This has meant that has meant that millions of employees have effectively experienced a 20% pay cut. But some may have had to take even bigger cuts, as the furlough scheme pays only the first £2,500 of the monthly wage, so if they earned more than this amount (which includes the other 20% not made up by the Government) in their jobs, then they would experience a serious shortfall in income.

Next, younger people are more likely to be affected by the furlough scheme, with the majority of those being female. The UK Government website shows that employees of any sex aged 17 were most likely to be furloughed by their company. Furthermore, a total of 61% of female employees aged 17 were furloughed, with the equivalent figure for males being 58%. By comparison, men aged in their 40s and women aged 41 to 58 were least likely to have been put on the furlough scheme, further highlighting the fact that it is disproportionally affecting younger people. Government statistics also show that employees from smaller companies are more likely to be placed on the scheme by their employer.

In a bid to lessen the impact of the virus on the economy, the Bank of England (BoE) has already lowered interest rates to just 0.1% and are now reportedly considering pushing them below zero and into the negative. This is, of course, more bad news for savers, but that is the point; rather than having money languishing in bank accounts, the BoE would be encouraging people to spend and re-inflate the economy.

Negative interest rates would give people who find themselves with less money, in a position where their major bills – such as tracker mortgages and credit card spending – will be cheaper, effectively giving people more money in their pockets.

It will take some time to determine whether the rescue package put in place by Rishi Sunak is really helping to bolster the economy, but in the meantime, if you are looking for a mortgage or to re-mortgage, come and chat to us at Grange Mortgages and see how we can help.