This week it felt like the wheels were turning to end many of the support measures in place during lockdown.
The FCA had a consultation paper out on whether the payment deferral period and measures should be extended. There is definitely some pressure to not have this extended.
Afterall with 1.8m customers on mortgage payment holidays and 60% rolling over, this would just kick many issues further down the road. However, there is also precedent elsewhere that this may not be as simple as just removing support. In Australia this was extended for a further 4 months, and interestingly in Canada is also backlash on interest charges…. I suspect the discussion is far from over here and we will likely see more developments in the UK too.
There was also positioning in the media on the ending of the Furlough scheme too. This is quite likely in my view (primarily because of the huge cost of the scheme), however, with this, it will crystalize much of the economic impact across the country… which is the concern.
Both of these are very much a double whammy… starting to flow through in the Autumn. Although the economic impact from COVID is likely to be less than feared, unemployment is still likely to surge as a result… we need to be prepared.
And the wild card here is still the virus itself. With increasing rates in many countries around the world again, we could start to see enforced mass re-lockdowns (Melbourne is an example, and regional restrictions in more other places like Preston and Aberdeen in the UK). All of this could happen again, but without all the previous support measures… potentially quite different dynamics on the economy.
Lastly, a couple of other interesting news items from the week.
- There is still potential for negative interest rates… somewhat unchartered territory
- It does seem like there has been less borrowing – on credit cards and also in areas like second charge mortgages too… consumer dynamics have changed
- Overdraft interest rates increased to 40% based on rules from earlier in the year with implementation postponed to August.
- More movement on price caps in the energy sector, good news for consumers, but will give scant relief to a business sector with already squeezed margins and shedding jobs.
- The post-COVID office is still under discussion. A nice graphic from the BBC.
Have a good weekend everyone… looks like a scorcher…@chris_w_tweet
