Major update 26/11/2020:
We are delighted to hear that further to our publication of this piece, the Chancellor has extended the furlough scheme until December. In addition to this, the 400,000 homeowners who would have been vulnerable to repossession are now protected by new FCA regulations set to last until 31st January 2021. We would like to thank you all for your ongoing support and helping to bring about this change.
With a quarter of Britain’s workforce currently furloughed, the Coronavirus Job Retention Scheme is keeping many people’s heads above water. As of 23rd June, the furlough scheme has costed the taxpayer almost £23 billion. The record-breaking bill makes the scheme too costly for the government to continue, leading to the announcement of a furlough scheme end date.
“I can announce today that the job retention scheme will be extended for 4 months until the end of October.”
Rishi Sunak, Chancellor of the Exchequer – 12th May 2020
After the UK furlough scheme end date, 31st October 2020, what will happen to the 9.2 million workers who need it? Let’s look at our independent market analysis to find out.
The UK Furlough Scheme End Date is the same day as FCA Protection for Homeowners Ends
The Financial Conduct Authority (FCA) makes sure mortgage lenders act fairly to their customers. Considering the difficulties with COVID-19, the FCA has banned lenders from starting or enforcing any repossession proceedings against homeowners. This has helped many homeowners who are struggling to make mortgage payments to keep their homes. Unfortunately, the ban on repossessions also ends on 31st October 2020 – the exact same date as the UK furlough scheme ends. Without significant savings, furloughed homeowners who have mortgages will then be at risk of losing their homes. Below, we present our analysis to predict how many people will be exposed to repossession after the furlough scheme end date.
How Many People are Facing Repossession after the Furlough Scheme Ends?
Of the 9.2 million workers that are furloughed, 64% are likely homeowners based on The Ministry of Housing Report.
Homeowners can be further grouped based on whether they have a mortgage on their property.
In the above mortgaged group, some workers will lose their job after the furlough scheme end date. To clarify, A leading business lender named MarketFinance has discovered that approximately 25% of furloughed workers will become unemployed. As a result, the 2.7 million furloughed workers with a mortgage are further divided by the risk of losing their job.
After losing their jobs, these unfortunate homeowners will have 2 main ways to continue mortgage payments to their lenders. The first way is by having sufficient savings to support them until they recover. The Centre for Labour and Social Studies found that 60% of workers can survive less than 3 months using savings.
The second saving grace for homeowners facing repossession could be the benefits system. However, since lockdown began on 23rd March 2020 the number of claimants has increased dramatically.
In other words, the surge in benefits claims means that government support will arrive late for homeowners. Our projections therefore show that 400,200 current workers will face repossession after the furlough scheme end date. Based on our projections, policymakers and regulators should take action now to prevent a second housing crisis.