Jeremy Hunt calls in banks for talks over spiralling UK mortgage costs

Chancellor Jeremy Hunt is to name in banks to handle what one Tory MP known as a “mortgage bomb that’s about to go off”, however he dominated out giving fiscal help to households combating the rising price of mortgages.

Hunt mentioned on Tuesday he wished to assist the Financial institution of England “strangle” inflation and that pumping extra money into the economic system would put additional upward strain on costs and rates of interest.

The chancellor rejected calls from Tory MPs to deliver again a Thatcher-era tax break — known as mortgage curiosity reduction at supply — to chop month-to-month repayments. The tax perk was abolished by Labour chancellor Gordon Brown in 2000.

“We gained’t do something that can lengthen the inflationary agony that persons are going by,” Hunt advised MPs at Treasury questions within the Home of Commons.

As an alternative the chancellor will name in main lenders on Friday to evaluate the state of the mortgage market and to see what extra assist they can provide individuals combating their month-to-month funds.

On Monday, the price of a two-year fastened fee mortgage within the UK rose above 6 per cent for the primary time since December.

Lenders have elevated the price of their mortgage merchandise after monetary markets raised their expectations of extra rate of interest rises by the Financial institution of England following poor inflation information.

However underneath a December 2022 settlement between banks, regulators and the Treasury, lenders are required to supply tailor-made help to these struggling to pay.

Andrew Griffith, Metropolis of London minister, mentioned lenders might supply mortgage time period extensions or a change to interest-only compensation holidays. “Any repossessions must be an absolute final resort,” he added.

In the meantime there was solely lukewarm Treasury help for the suggestion by Michael Gove, the cupboard minister chargeable for housing, that 25-year fastened fee mortgages might assist alleviate the state of affairs.

Griffith mentioned there have been already long-term fastened fee mortgages available on the market however that “the constraining issue is client demand”. He added they’d not proved extremely popular.

The concept of a “lifetime” mortgage was proposed within the Conservatives’ 2019 election manifesto, however Treasury insiders mentioned markets must settle — in different phrases, rates of interest must come down significantly from their present ranges — earlier than they have been more likely to be widespread.

Richard Donnell, analysis director at property web site Zoopla, mentioned the expense of 10 or 20-year finance discouraged debtors from breaking the behavior of choosing low-cost short-term offers and hoping charges would come down subsequent time spherical.

“My view is the federal government has to return in and pump prime this market to open it up,” he added.

“I don’t suppose the market will get there by itself. Perhaps the federal government must underwrite or assure these mortgages — maybe for first time patrons solely — to cut back the chance premium.”

Labour’s Treasury spokesperson Pat McFadden mentioned the UK was nonetheless paying the worth for the “large financial experiment” carried out by Liz Truss, former prime minister, final yr, which compelled up mortgage charges.

The issue can also be beginning to fear Conservative MPs as they put together for a common election anticipated in 2024.

Jake Berry, a former Tory minister, mentioned there was “a mortgage bomb about to go off”.

Rishi Sunak has insisted his pledge to halve inflation by the tip of 2023 to about 5.5 per cent continues to be on observe, and that that is one of the simplest ways to handle the mortgage downside.

Downing Road mentioned the federal government was already doing rather a lot to assist individuals with the price of residing disaster, however has not signalled any intention to transcend present plans.

Further reporting by James Pickford

Back To Top