The City watchdog has said Britain’s lenders may need to consider introducing “sustainable forbearance” for customers who will struggle with loan repayments after coronavirus relief measures end in the autumn.
The Financial Conduct Authority (FCA) has launched a “call for input” to determine what measures may be needed once repayment holidays introduced during the pandemic come to an end on 31 October.
Firms have provided over 1.8m payment deferrals and over 1.6m personal loan and credit payment deferrals. The FCA said that while the majority of borrowers can be expected to resume repayments, a “significant minority will need further support”.
It added that consumers who applied for a deferral were more likely to have borrowed on one credit line to make payments on another, borrowed from family or friends, or reduced their day to day expenditure.
The FCA said that a recent survey showed the groups most vulnerable were those who had been made redundant or seen a decrease in household income, and those who had “low financial release” before lockdown.
“We consider that the appropriate time for firms to move beyond blanket deferrals is at the end of the customer’s second deferral,” the regulator said.
Among measures being mooted are the deferral of payments of capital, interest, fees and charges.
The deadline for responses is 7 August. The FCA said if responses show that further measures are needed it would publish a draft paper on mortgages in late August, followed by draft guidance in mid-September.
Results from Britain’s biggest banks this week show they are anticipating a huge number of loans turning sour due to the pandemic.
Natwest today announced a hit of £2.86bn in the first half of the year to cover expected loan losses. Lloyds and Barclays have also said they would set aside hefty sums for loan losses this week.