Mortgage holidays to end on same day as furlough draws to a close
MILLIONS of families could face a brutal autumn after the City watchdog announced an end to mortgage holidays at the same time as the taxpayerfunded furlough scheme is axed.
Covid-hit workers will no longer be able to demand a break from mortgage payments beyond Oct 31, following a change to rules set out by the Financial Conduct Authority.
The furlough programme, which pays up to 80pc of wages for workers unable to do their jobs, will end on the same day – potentially triggering mass redundancies as firms sack staff who they can no longer afford. It means Nov 1 could be the day when the true extent of the economic havoc wreaked by Covid-19 is finally revealed.
Fears of a fresh blow are likely to be heightened after a survey by the Confederation of British Industry revealed savage job cuts are expected in Britain’s dominant services sector.
Consumer-facing companies have already slashed jobs at the fastest pace in the survey’s 22-year history, as managers take drastic action. Business and professional services companies are also shedding jobs at the quickest pace since the financial crisis in 2009.
Ben Jones, the CBI’s principal economist, said: “As we head into the autumn, the UK needs a bold plan to protect jobs as the job retention scheme draws to an end, to support the services sector.”
Together, the mortgage and furlough lifelines have helped millions of people cope with the Covid crisis.
Around 2m borrowers have taken a mortgage holiday, and as many as 9.4m workers were put on furlough. The FCA urged banks to be flexible with homeowners in difficulty after mortgage holidays end, granting extensions or restructuring payments if needed. “The majority of customers who have had a payment holiday are expected to resume full repayment. However, many will remain in financial difficulty,” the watchdog said. “Some consumers will continue to be impacted by coronavirus, while others will be newly impacted in the coming months.”
Meanwhile, doorstep lender Provident Financial expects a surge in demand later this year if there is a rise in unemployment after the end of the furlough scheme.
Boss Malcolm Le May said as many as 2.4m more people could be locked out of borrowing from mainstream banks as a result. His firm – known as the “Provvy” – offers high-interest doorto-door lending to customers with a poor credit history.
Its car loan division, Moneybarn, handed out a record 4,500 loans in July with about 40pc of them going to key workers. Mr Le May said the average car loan was about £8,000 and that drivers seemed to be buying cars to avoid commuting on public transport.
Provident pledged to repay furlough money it took from the Government when the coronavirus hit. It is to cut up to 300 jobs.
Around 9.4 million workers were placed on Chancellor Rishi Sunak’s furlough programme