Economy set for November crunch as banks told to end mortgage holidays

Struggling homeowners will no longer be able to demand a break from payments after Oct 31 following watchdog's ruling

Millions could face a brutal autumn after the City watchdog announced an end to mortgage holidays at the same time as the taxpayer-funded 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 is finally revealed.

Fears of a fresh blow are likely to be heightened after a survey by the Confederation of British Industry (CBI) revealed savage job cuts are expected in the dominant service sector.

Consumer-facing companies have already slashed jobs at the fastest pace in the survey's 22-year history, as managers take drastic action in the face of the pandemic. 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. About 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.

Meanwhile, doorstep lender Provident Financial expects a surge in demand later this year if there is a rise in unemployment after the end of furlough.

Boss Malcolm Le May said as many as 2.4m mored people could be locked out of borrowing from mainstream banks as a result.

His firm - known as the Provvy - offers high-interest door to door lending to customers with a poor credit history.

Provident pledged to repay furlough money it took from the Government when the coronavirus hit. It is to cut up to 300 jobs.