Jeremy Hunt calls in the lenders as banks warn of more mortgage rate pain on the horizon
- Millions are seeing huge price rises on their mortgages as lenders hike rates
Banks last night warned of ‘more pain ahead’ for homeowners facing rising borrowing costs as Chancellor Jeremy Hunt turned down ‘injecting large amounts of cash’ to help.
Millions are seeing hundreds of pounds added to monthly repayments as lenders scramble to hike rates, pushing the average cost of a two-year fix to more than 6 per cent.
And another expected Bank of England hike tomorrow will pile on the pain. The Bank’s rate – a benchmark for borrowing across the economy – is expected to rise from 4.5 per cent to 4.75 per cent. Markets are betting there is a strong chance they will hit 6 per cent by the end of this year.
Economists warned that such steep rate hikes, intended to bring down inflation by dampening demand in the economy, could drive it into recession.
David Postings, chief executive of industry body UK Finance, said there were more tough times to come for homeowners on fixed-rate deals that expire soon, forcing borrowers to take out new loans at much higher rates.
Banks last night warned of ‘more pain ahead’ for homeowners facing rising borrowing costs as Chancellor Jeremy Hunt turned down ‘injecting large amounts of cash’ to help
Millions are seeing hundreds of pounds added to monthly repayments as lenders scramble to hike rates
UK Finance estimates 800,000 will see their fixed deals end later this year and a further 1.6million next year. Home buyers struggling to afford to get on the housing ladder are also being hit.
Mr Postings said: ‘We are in the midst of a really challenging economic environment, and there could well be more pain ahead.’
Mr Hunt will convene a meeting of the UK’s major lenders on Friday to explore options for easing the burden on mortgage holders.
Writing in the Mail today, Mr Postings says: ‘Rising mortgage rates creates concern among mortgage holders and people looking to get on the housing ladder.’
Fears over the market saw one Tory MP, Lucy Allan, recently advise struggling homeowners to ‘sell now, while you still can’.
READ MORE: Jeremy Hunt warns he WON’T bail out stricken Brits despite two-year mortgage fixes soaring over 6% saying he backs BoE’s desperate efforts to slash inflation – but Chancellor calls in lenders to urge them to keep rates down
But while Mr Postings acknowledged ‘frustration’ among borrowers left in the lurch when lenders withdraw deals, he insisted there was still ‘good mortgage availability’ and said there was support available, including a period of reduced payments or a temporary switch to an interest-only deal.
The Chancellor came under pressure in the Commons yesterday as Tory backbencher Bob Stewart told him constituents were ‘absolutely terrified’ about rising payments and former minister Sir Jake Berry asked if he would consider tax relief on interest. Mr Hunt warned that ‘those kind of schemes which involve injecting large amounts of cash into the economy right now would be inflationary’.
Downing Street likewise insisted ‘the best thing to do is tackle inflation’. Friday’s summit with the banks is a follow-up to a meeting in December where Mr Hunt reached a voluntary agreement on offering information and help to struggling customers.
But financial expert Martin Lewis said that meeting had been a ‘missed opportunity talking shop’. Mr Lewis, founder of the website MoneySavingExpert.com, said he had previously warned of a ‘mortgage ticking time bomb’. He told ITV’s Good Morning Britain: ‘I’m afraid that time bomb is now exploding.’
Virgin Money became the latest lender to put up rates yesterday with hikes of up to 0.6 percentage points, while Skipton Building Society also said it was putting up costs.
The cost of renting is the highest for a decade, at 28.3 per cent of pre-tax earnings. Property website Zoopla found average rental costs surged by 10.4 per cent in April compared to a year ago.
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