As the Bank of England (BoE) has raised interest rates to 5%, there are fears that millions of mortgage holders in the UK face a ‘ticking time bomb’. As inflation failed to fall from its current level of 8.7%, the BoE reacted with the 13th consecutive interest rate rise in a row by a higher than expected half a percentage point.
Interest rates are now at their highest level since the financial crisis of 2008, and they could rise even further by the end of the year. This has sparked concerns that people who are coming to the end of cheap fixed term mortgage deals over the next year will be hit by unaffordable monthly rises in their mortgage repayments.
The chancellor Jeremy Hunt has responded by insisting the key is to bring inflation down, rather than to roll out extra support for mortgage holders He said: “if you stick to your guns, you bring inflation down”. He added that the “single most important thing any government can do is be responsible with public spending and avoid unnecessary borrowing”.
Hunt insisted that direct support to mortgage holders was the wrong route to go down, saying: “Nor, sadly, can we offer short-term mortgage support if it means inflation stays higher for longer. It would be self-defeating.”
He added: “If you look at what’s happening in other countries, you can see that rises in interest rates do bring down inflation over time. That will happen here. But we need to be patient. If we stick to the plan, we’ll get to the other side.” However, Sir Kier Starmer, the leader of the opposition, took a different view of matters.
Speaking at an event in London, just ahead of the BoE’s announcement, he said: “Within an hour now just across the river, the Bank of England will take a decision that will underline with emphasis the reality of where we stand as a nation, and also the fact that we now live in a new economic era.”
He added: “Next month is going to feel a lot worse than it feels now, and as many people have said to me, if you’ve got only the mortgage going up, that might be bearable, but it’s alongside the energy bills going up, the food bill going up.”
The shadow chancellor Rachel Reeves outlined how Labour would respond to the mortgage crisis. As the average household faces an annual rise of £2,900 a year, she called on the government to allow borrowers to switch to interest only mortgage payments, and to have the flexibility to extend their mortgage terms should they wish to do so.
She also said that urgent guidance should be issued to prevent any changes from adversely affecting borrower’s credit scores. A low credit score can harm your chances of being able to get credit in the future.
Anyone who is seeking to remortgage within the next six months should contact a mortgage broker for expert advice on navigating the choppy markets.
Do you want to remortgage after an IVA? Get in touch with us today to see how we can help.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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