Rishi Sunak has ruled out extra help for UK homeowners struggling to pay soaring mortgage costs, as the average two-year fixed-rate loan rose above 6%.
The prime minister said the government should “stick to the plan” to halve inflation in its attempts to tackle the cost of living crisis, despite growing pressure on the Conservatives as households across the country face a surge in borrowing costs.
Mortgage rates have soared in recent weeks as the Bank of England’s attempts to cut stubbornly high inflation have fed through into lending deals. City investors widely expect the central bank to announce its 13th consecutive rate increase on Thursday this week in response to persistently high inflation.
Threadneedle Street is expected to raise its key base rate by at least a quarter point from the current level of 4.5%, extending its most aggressive round of interest rate increases in decades since lifting it from 0.1% in December 2021.
TSB became the latest high street bank on Monday to pull their cheapest mortgage deals, as high street lenders reacted to the prospect of higher Bank of England base rates by pushing up the cost of new home loans to the highest levels since the 2008 financial crisis.
The average rate on a two-year fixed-rate mortgage rose to 6.01% on Monday – the highest since 1 December – from 5.98% on Friday. The average five-year deal rose to 5.67% from 5.62%.
The government has faced calls to help homeowners as more than 2.4m fixed-rate deals are due to expire by the end of 2024, leaving households with the prospect of a sharp increase in rates before the next election.
Speaking on ITV’s Good Morning Britain, Sunak said: “I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people.
Is the Government going to do anything to help people who are facing increases in their mortgage rates? @GMB questioned @RishiSunak who said: 'We've got to stick to the plan.' pic.twitter.com/oSqDT8fVuX
— Good Morning Britain (@GMB) June 19, 2023
“We’ve got a clear plan to do that, it is delivering, we need to stick to the plan. But there is also support available for people. We have the mortgage guarantee scheme for first-time buyers and we have the support for mortgage interest scheme which is there to help people as well.”
UK inflation is 8.7%, well above the Bank of England’s 2% target.
The consumer champion Martin Lewis said on Monday he warned the government last autumn that a “ticking timebomb” of higher mortgage costs was facing millions of households this summer.
He tweetedL “They can’t say they weren’t warned! We needed to prepare in case it rates rocketed – waiting for it to happen would be too late. Yet now, the timebomb has exploded and we’re scrambling about what to do.”
On Sunday, the cabinet minister Michael Gove had raised hopes that the Treasury may intervene to help homeowners, saying help for mortgage-holders was “under review”. However, Sunak’s comments suggest no extra help is planned.
Keir Starmer has also refused to pledge extra specific support for mortgage-holders should the party gain power. Asked whether Labour would offer support, he said the party would tighten up the windfall tax on oil and gas companies to yield more money to help reduce energy bills. “That wouldn’t be a direct mortgage payment, but it would help people with their bills,” the Labour leader told Sky News.
The average two-year fixed rate on a buy-to-let mortgage increased from 6.21% on Friday to 6.30% today, Moneyfacts said. The number of buy-to-let mortgage products on the market has fallen, to 2,515 on Monday from 2,589 on Friday.
Separately, Rightmove said on Monday that rising mortgage rates had brought forward the usual summer slowdown in the housing market. Asking prices for British homes fell in June for the first time in six years, according to the property website.
Average new seller asking prices slipped by £82 this month to £372,812 – the first monthly drop in new asking prices this year, and the first at this time of year since 2017. Against last year, prices were up 1.1%.
Riz Malik, the founder and director of broker R3 Mortgages, said: “We urgently need a cross-party mortgage taskforce to find potential solutions to this ticking timebomb. This should [comprise] economists, lenders and other stakeholders who are actively involved in the mortgage market. We need action or the impending financial earthquake is going to send shock waves across the country.”
