MORTGAGE lenders have been summoned for talks with the Chancellor over fears of a rate “bomb” – but the Treasury has ruled out any public money to help homeowners.
Chancellor Jeremy Hunt rejected Tory calls in the Commons on Tuesday for direct state intervention to help those struggling to pay their mortgages as monthly payments rise because of climbing interest rates.
Financial observers say the average two-year fixed mortgage rate topped 6% in the past week, up from 5.26% at the start of May.
Former Conservative Party chair Jake Berry urged the Chancellor to consider introducing “mortgage interest relief at source” to quell fears of a “mortgage bomb about to go off”.
Berry said: “People are very concerned with what is being described as the mortgage bomb about to go off.
“Is now the time for him to look at reintroducing a bold Conservative idea of mortgage interest relief at source? Because if we don’t help families now, all the other money that we spent to help them will have been wasted if they lose their home.”
Hunt said spending public money to help homeowners risked increasing inflation – noting the Government’s commitment to halving price increases.
The Chancellor said: “I listen to what he says carefully, but I think he will understand that those kind of schemes which involve injecting large amounts of cash into the economy right now would be inflationary.
“So, much as we sympathise with the difficulties and will do everything we can to help people seeing their mortgage costs go up, we won’t do anything that would mean we’ve prolonged inflation.”
Speaking later in the session, Hunt said he was meeting with Britain’s biggest lenders to probe what help banks could offer homeowners without direct state intervention.
He said: “We won’t hesitate in our resolve to support the Bank of England as it seeks to strangle inflation in the economy and the best policy is to stick to our plan to halve it.
“But I also want to make sure that we do everything possible to help families paying higher in ways that do not themselves feed inflation, so later this week I’ll be meeting the principle mortgage lenders to ask what help they can give to people struggling to pay the more expensive and what flexibilities might be possible for families in arrears.”
Renters are also feeling the pinch, it was revealed this week, with new research finding the average tenant is now 28% of their pay before tax on rent.
The SNP said the Tories were presiding over a “housing nightmare”.
Chris Stephens, the party’s housing spokesperson, said: “The reckless and ignorant economic decisions of the Tories and pro-Brexit Labour have wreaked havoc on the housing market, punishing households who are already seeing other living costs soar.
“These latest figures paint a stark picture of the Tory-created housing nightmare which has continued to worsen every day, and that, through no fault of their own, threatens the security of people's housing and their living conditions.”
