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Millions in U.K. Will Soon Struggle to Pay Bills and Mortgages

U.K. Faces October Cliff Edge With End of Wage and Loan Support

Millions of Britons will struggle to pay bills and mortgages when the government pulls the plug on various support programs at the end of October, according to a survey by the Standard Life Foundation.

Of the 3.7 million households relying on mortgage-payment holidays and bill deferrals, more than half are already facing financial difficulties, the survey showed.

Millions in U.K. Will Soon Struggle to Pay Bills and Mortgages

Many so-called payment holidays are due to end on Oct. 31. That’s the same date the government’s support for wages is due to finish winding down, making it a particularly difficult time.

“We are facing a cliff-edge situation,” said Mubin Haq, chief executive officer of the Standard Life Foundation. “Regulators and lenders need to rapidly consider how they will manage” at that time “to avoid large numbers of households facing enforcement action, including families losing their homes.”

Nearly half of those taking a payment holiday have no savings at all and 46% expect to experience a loss of earnings in the next three months, the charity’s survey of 6,000 households found.

The figures underscore the scale of the challenge facing Chancellor Rishi Sunak as he attempts to remove the expensive support propping up many British families without causing a further economic collapse. Output shrank the most ever in the second quarter and government debt has surged to a record.

The end of mortgage forbearance periods and risk of unemployment climbing in the coming months could put the property market under strain, a separate report by the Resolution Foundation warned.

Even so, measures taken to toughen lending criteria and a decline in younger buyers mean that there are fewer home loans with small deposits. Such risky mortgages have halved since 2008 and property owners are less exposed to the risk of negative equity -- where a home is worth less than the mortgage used to buy it -- than following the last crisis.

©2020 Bloomberg L.P.