Tory mortgage catastrophe
With interest rates set to be hiked again a mortgage catastrophe is engulfing homeowners. Labour plans to help struggling mortgage holders and calm the crisis.
Labour accused Chancellor Jeremy Hunt of standing by as millions suffer by taking the softer approach of just asking lenders to go further in supporting struggling borrowers.
Keir Starmer clashed in the Commons yesterday with Rishi Sunak and blamed the Conservatives for “13 years of economic failure and a Tory kamikaze budget… put mortgages through the roof“,
The Opposition is urging the Government to instead compel lenders to allow borrowers to temporarily switch to interest-only payments or lengthen their mortgage period.
Banks would also have to wait at least six months before starting repossession proceedings under a five-point plan set out by shadow chancellor Rachel Reeves on Thursday.
She will detail the strategy as the Bank of England is expected to raise the base interest rate by at least 0.25 points to 4.75%, leading to another hike for many mortgage payers.
Ms Reeves said:
“Across Britain, people are being hit hard by a Tory mortgage penalty. Unlike this Government, Labour will not stand by as millions face a mortgage catastrophe made in Downing Street. Instead of squabbling over peerages and parties and ruling out any action on mortgages, the Tories should be taking responsibility and acting now.”
Annual mortgage repayments are set to rise by £2,900 for the average household remortgaging next year, according to economists at the Resolution Foundation.
With those on variable rate mortgages also being hit, Labour argues the “gap” in rates with neighbouring countries is leaving typical households in Britain £1,000 worse off.
Under their plans, the Financial Conduct Authority would also be told to issue guidance to prevent the changes impact credit scores.
Lenders would also be forced to allow any changes to be reversible, unlike under the current situation where borrowers can be trapped in less favourable terms.
Options such as extending a mortgage term can ease homeowners’ monthly payments in the short-term.
But they could also hit retirement plans or leave borrowers paying the lender more in interest over the course of the mortgage.
Concerned about further fuelling inflation, Mr Hunt was resisting calls from some Conservatives to offer major financial support to defuse a “mortgage bomb” hitting core voters.
The Consumer Prices Index (CPI) measure of inflation remained at 8.7% in May, the same level as in April, in a blow to the Government’s pledge to halve the rate of soaring prices. The Chancellor is resisting calls from his own party to offer major financial support to defuse a “mortgage bomb”