“What we’re seeing now is only the beginning. The true impact of what has gone on is not in any way being felt yet,” says Michelle O’Hara, regional manager for South Leinster Money Advice and Budgeting Service (Mabs).

“There is going to be, in my view, a heavy debt burden on an awful lot of people. I think that the full extent of that won’t be seen until early 2021.”

You would have thought a pilot would never be out of work, but some of them are

Hospital Report

If rising numbers of GP referrals for Covid-19 tests act as an early warning system for an impending surge in disease, calls to the Mabs helpline operate as a red flag for a coming wave of financial distress. “The helpline is where we measure the temperature for the rest of the country.”

And she is very concerned by what that temperature reading is showing. In May 2020, the volume of calls was at 55 per cent of 2019 levels. One month later, it had increased to 88 per cent of the previous year. By the week beginning September 30th, calls were 39.1 per cent higher than in same week in 2019. Overall, September saw the highest volume of calls since 2014.

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This is just the tip of the iceberg. “It will be the first quarter of 2021 before we see the big hit” in terms of financial distress, she predicts.

Calls to the helpline are coming from people in industries that never before had to engage with the service. “You would have thought a pilot would never be out of work, but some of them are. We’re seeing pilots, hospitality workers, accommodation workers, engineers, taxi drivers,” she says.

“Aviation is a big one that we’re seeing at the moment. We would have seen hospitality workers over the years,” but they always had the option to find another job, or even to emigrate. Those opportunities are no longer there.

“A total loss of income in hospitality wouldn’t have been their primary issue; now it is.”

The top three reasons for people contacting the helpline are, she says: the disconnection of utilities; reduction in income due to Covid-19 and support with creditor contact.

One issue that has emerged recently is banks refusing to offer an alternative repayment arrangement (ARA) to mortgage holders in distress who are on the pandemic unemployment payment (PUP). “One of the challenges is the banks not willing to offer an ARA while someone is on PUP because of the temporary nature of it. One or two of them have said that they are not going to even assess a statement of affairs at the moment, in light of the fact that you’re on a temporary unemployment payment.”

She cites one recent case where a Mabs client who had lost their job because of Covid-19 engaged with the bank and submitted their standard financial statement. The bank replied that “they were unable to offer an ARA, as they’re unable to accept the PUP payment as a long-term solution, since it only lasts until April 1st” – the current deadline for the scheme to be phased out. “They wanted confirmation of when the client would be returning to work before they offer the ARA,” something the client, of course, is unable to give.

O’Hara is concerned about this development, particularly given the high numbers of those already in long-term arrears at the start of the pandemic. At the end of the second quarter of 2020, the number of those in arrears of 720 days or more was 26,228. This is 46 per cent of all private homes in mortgage arrears.

Those who took a repayment break during lockdown because they lost their job and are coming to the end of it are finding now that they have to choose between higher repayments or a longer loan term. “At the time, you may not have had an alternative option. But that mortgage break is going to cost you over time. If you’re coming out of it now, your options are either going onto a higher repayment now to pay off the arrears, or to look for an extension of the mortgage term. Some people are mortgaged out to age 70 already. Do they want to stick another six months onto it?”

We're not seeing the pile of money that people are supposedly sitting on. It may be out there, but it's not what's presenting itself to us

But by far the biggest issue Mabs is seeing at the moment is the threat of disconnection from essential utilities. “Looking back on it now, the quietness in May was because there was no pressure on anybody to pay anything during that time. The creditor calls and letters: it all stopped. In south Leinster, our quietest month was April. And then it started coming back up from May and June. And now it’s back up to full tilt.

“From mid-way through August, creditors were starting to get into contact again, looking for the resumption of payment. Now, what we’re seeing is a big surge in the threat of utilities disconnections. There was a moratorium on disconnection during lockdown. But your bill didn’t disappear, it was still there. Now they can start actively looking for arrears again.”

Economic indicators suggest household savings soared during lockdown, but that’s not the case across the board, says O’Hara. “We’re not seeing the pile of money that people are supposedly sitting on. It may be out there, but it’s not what’s presenting itself to us. Money was saved during the complete lockdown” on entertainment, commuting costs and childcare. “But the money was spent in other ways. There was a lot of doing up of houses and outside spaces.”

“The cost of everybody being at home for seven days a week is more, so your bills were likely to have been higher. That’s a big one we’re seeing at the moment.”

People who had separate income streams through the gig economy have also taken a hit. “There are no metrics to measure the impact on mná tí in the Gaeltacht, or people who usually have Spanish students to stay over the summer, or the guys who would play in a wedding band. The gig economy has been severely impacted.”

Overall, the Mabs helpline is seeing people suffering high levels of anxiety. And the financial distress caused by Covid-19 is fundamentally different to that caused by the 2008 recession, she says. “The opportunity to emigrate is not there. If you’re a 50-year-old pilot, you’re having to do a total about-turn in your lifestyle. People can upskill, but that won’t happen immediately.”

Overall, Mabs welcomes the measures introduced in Budget 2021. “The focus on social welfare payments, on families and on the social inclusion piece for those living alone and on the self-employed were welcome. The budget was never going to be everything to everybody. They’re trying to stabilise things, but the reality is that nobody knows what might or might not happen. We don’t know from one week to the next. That’s the challenge with it.”

O’Hara urges people not to wait until they’re deep in distress before contacting Mabs. “When people call for the first time, they’re normally quite deep in difficulty. They might have been threatened with legal action or eviction, or the car has been lifted from the front of the house. They’re at the end of their tether. But you don’t have to wait to come to us.

“I always say, we don’t care why you ended up where you are. That’s not our concern. Our concern is to try to get you back on an even keel. If you’re crushed under the pressure of debt, it sinks into every fibre of your being. You don’t sleep. You start getting unwell. Your job is affected. Your family life is affected. You might turn to alcohol. But we can show people there is light.”

The Mabs helpline is 0761 07 2000.