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Furlough scheme and stamp duty holiday-end due tomorrow – analysis

  • 29/09/2021
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Furlough scheme and stamp duty holiday-end due tomorrow – analysis
The government's £70bn furlough support scheme comes to an end on 30 September with the final phase of the stamp duty holiday also due to finish.


From the 1 October, the stamp duty threshold will return to £125,000 – or £300,000 for first-time buyers purchasing a property worth up to £500,000. With the government’s furlough scheme coming to an end too, how will the changes affect the mortgage adviser and banking industry?


The lender approach


David Kennedy, chief lending officer at Masthaven, said: “It’s important to remember that the financial impact of the pandemic is far from over. As an industry, banking touches almost everyone in the country and the sector has a societal responsibility to ensure the welfare of the UK after the end of the government’s relief schemes.

He said lenders need to make sure that their customers aren’t left feeling abandoned and often this means taking proactive action.

“By breaking down the stigma around financial difficulties and debt and identifying early any customers that might be at risk or struggling financially, lenders can ensure their customers get the support they need and head off potential problems before they worsen.”

He added: “Just as Covid aid schemes are wound down, borrowers and potential borrowers are facing an economy disrupted by supply chain issues and rising inflation. All these factors, combined with rapid house price growth, may mean that borrowers actually require more support than ever over the coming months.”

He said the specialist lending sector is well-prepared to tackle this challenge with a more flexible, pragmatic and personalised approach.


The outlook for SMEs

Chirag Shah, CEO at Nucleus Commercial Finance said: “The scheme has provided a lifeline to SMEs when they most needed it, allowing them to continue operating while preventing the UK from a major unemployment crisis.

“Although the outlook is more positive than it has been for some time, we’re not over the worst yet. The scheme’s end could leave many SMEs struggling to survive and exacerbate the financial and mental health challenges many business owners have faced over the last 18 months.

“Moving forward, government and industry must work together to communicate the support available to SMEs and demonstrate how they can help businesses thrive beyond the pandemic. This is where the alternative finance industry has a crucial role to play, in providing businesses with the flexible finance they need at speed, to help them deliver on their ambitions.”


Support for the SMI scheme

Lender trade bodies UK Finance and the Building Societies Association have called for important changes to be made to the Support for Mortgage Interest (SMI) scheme to help struggling homeowners as the furlough scheme draws to a close.

SMI is a government loan scheme which helps homeowners who are in receipt of benefits, but as it stands, they must wait 39 weeks to claim, during which time their financial situation may become so difficult that they are unable to remain in their home.

Paul Broadhead, head of mortgages and housing at the BSA, said: “With the end of the furlough scheme only a day away, there is a likelihood that unemployment will rise. Without urgent modification of the SMI scheme the risk of home repossession could become a reality for many despite the best efforts of lenders.

“Without the reforms, we expect more government funding will be required for the provision of housing benefits for former homeowners who were unable to get the financial support they needed, when they needed it.”


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