The following Answer to an Urgent Question was given in the House
of Commons on Tuesday 13 June.
“The Government recognise the anxiety that people feel about
mortgages, and are using the tools at their disposal to limit the
rise in rates. We are not an outlier in this regard: as
Opposition Members will know, central banks around the world are
raising interest rates to combat high inflation driven by the
pandemic and Putin’s war.
Given that inflation is the number one enemy, we are focused on
delivering the Prime Minister’s pledge to halve it this year.
Nevertheless, I know that mortgage rates and the availability of
mortgages are a concern right now. Mortgage arrears and
repossessions remain below pre-pandemic levels but, if a borrower
falls into financial difficulty, guidance from the Financial
Conduct Authority requires firms to offer tailored support and to
deal with customers fairly. The Government also offer loans to
help eligible home owners to cover the interest on their
mortgages through the support for mortgage interest scheme from
the Department for Work and Pensions, and make it clear that
repossession must be a last resort for lenders through the
pre-action protocol.
As long as economic challenges exist, we will continue to stand
by families. To date, government support to help households with
rising bills in 2022-23 and 2023-24 totals £94 billion—that is
equivalent to an average of £3,300 per household—as well as a
record 9.7% increase in the national living wage, which I am sure
that the Opposition support. While we are taking action to halve
inflation and help families, the Opposition would make it all
worse. The Institute for Fiscal Studies has been clear that
Labour’s £28 billion a year borrowing plan would risk even higher
interest rates and higher inflation, and even the shadow
Chancellor has admitted that its position is reckless. This is a
Government on the side of the British people and that is why, as
we shelter people from rising prices, our task remains getting
inflation down and getting the economy growing and debt
falling.”
19:38:00
(Lab)
My Lords, every day brings more bad news for Britain’s mortgage
holders. Two-year fixed-rate mortgages are now approaching 6%,
and HSBC and Santander are just two lenders to have withdrawn all
new mortgage deals from the market. The average mortgage holder
is facing an increase in payments of £2,300 this year alone and
borrowers are now being warned that mortgage rates are set to
rise even further.
Interest rates first spiked dramatically last year when the
disastrous mini-Budget sent markets into meltdown, but the
two-year gilt yield has now exceeded even those levels above its
US equivalent. With 1.5 million home owners set to come off
fixed-rate mortgage deals this year, facing severe increases in
their repayments, why is UK inflation not falling as quickly as
the Government promised and why is inflation higher for longer in
the UK than in many similar economies?
The Parliamentary Secretary, HM Treasury () (Con)
My Lords, the underlying causes of high inflation, as we all
know, are driven by higher energy prices as a result of the war
in Ukraine and a tight labour market. There are complex factors
as that plays out but the Government are absolutely clear in
their commitment to get inflation down. We have seen inflation
begin to fall, and institutions such as the IMF have recognised
the Government’s action in this area and that we are set on the
right path to reduce inflation, which will help ease the pressure
on not just mortgage holders but all people facing higher prices
at the moment.
(LD)
My Lords, will the Government set up an emergency mortgage
protection fund, potentially recouped by a bank levy, to ensure
that those struggling the most will not lose their homes and face
financial wreckage and wreckage of their lives?
(Con)
My Lords, I hope the noble Baroness will take some comfort from
the fact that mortgage arrears and repossessions remain below
pre-pandemic levels. I reassure her that, if a borrower falls
into financial difficulty, guidance from the FCA requires firms
to offer tailored support and deal fairly with customers facing
difficulties in meeting their payments. The Government also have
a range of schemes in place to support borrowers, not least the
support for mortgage interest scheme.
(Con)
As my noble friend knows, the mortgage market is affected by
interest rates, both the current rate and, even more importantly,
the forecast rate. Is she aware that the pricing of housing is
falling UK-wide, and falling extensively, partly because of
mortgage costs but partly because of reasons that are nothing to
do with mortgage cost: the policies of the Secretary of State, Mr
Gove, which are very anti big builder? They are also causing
difficulty in the rental market.
In that situation, with growth just showing the ability to come
through, which is very encouraging, and with wages just beginning
to show some positive response to the situation, is it not time
that the Bank of England—although we are not responsible for
it—recognise that rates should be held for the moment and allow
the market to settle? Given the two factors I have
mentioned—growth growing and inflation falling— I hope the
interest rates recommended by the Bank of England will fall.
(Con)
My Lords, interest rate decisions remain a matter for the
independent Monetary Policy Committee of the Bank of England, but
I say to my noble friend that high inflation is also bad for the
economy. To have high growth we must first have low inflation, so
we absolutely support the Bank of England in its task of pursuing
the 2% inflation target and the difficult decisions it will have
to take to achieve that.
(Lab)
My Lords, I cannot resist the temptation to draw to the House’s
attention the fact that this is the 278th anniversary of the
Battle of Naseby—I am not picking a fight with the noble
Lord.
My question concerns the fact that this is going to have a
massive effect on the buy-to-let market. We are expecting further
increases in interest rates, given recent news. A report in the
Times last week showed the relationship between increases in the
bank rate and the knock-on effect on “underwater” buy-to-let
owners. This will cause severe damage to the buy-to-let market. I
have mixed feelings about that market, but to the extent that
owners of such properties cannot maintain their property
properly, this will have a deleterious effect on the UK’s housing
stock. The Government should be seized of this issue. To me, the
solution is that the Government should provide funds to local
authorities in order that they can take over these underwater
buy-to-let properties—interestingly, a large proportion of them
are ex-council properties anyway—so that local authorities can
address the housing problems in their local areas.
(Con)
My Lords, the noble Lord will know that the Government have given
local authorities many more powers and more discretion in how
they approach housebuilding and house supply in their area in
recent years. He is right that the changes to interest rates will
affect those in rented accommodation as well as those who have
mortgages through channels such as he described. The Government
are putting in place further support for renters. We have a
series of reforms coming in through the Renters (Reform) Bill
which will improve quality and security in the private rented
sector. For those on benefits, the Government boosted investment
in the local housing allowance in April 2020 by nearly £1
billion, and rates have been maintained at this increased level.
