Rishi Sunak has been warned that falling mortgage rates will not boost his electoral hopes as 1.3 million households face higher payments before the general election.
The PM had hoped a better economic outlook and falling rates would provide a boost in time for an autumn election, saying “2024 is going to be a better year”.
But House of Commons research, commissioned by the Lib Dems and seen by The Independent, reveals 1.3 million fixed-rate mortgage deals will expire before Britons go to the polls for an election expected in October.
After the PM was accused of “bottling” a May contest, the figures showed an additional 600,000 families will face mortgage hikes.
Economists, mortgage brokers and pollsters have warned the PM that voters heading to the polls will decide based on “how they feel in their pockets, not what the stats say about the economy”.
And they have said that while it is positive mortgage rates are falling, voters can only expect to be made “slightly less poor than they would have”.
The prime minister has been warned falling mortgage rates will not boost the Tories’ chances at a general election— (PA)
At the beginning of 2022, an average two-year fixed-rate mortgage carried 2.38 per cent interest.
At the beginning of this year, that had risen to 5.93 per cent, meaning monthly repayments would be £395 higher, according to data from Moneyfacts.
While that is £116 less than the payments homeowners would have faced when mortgage rates spiked after Liz Truss’s mini-budget, it could still add close to £5,000 to a household’s annual bills.
For the same household renewing a five-year deal, they would still face a £291 monthly increase.
Pollster Luke Tryl, UK director at More in Common, told The Independent the “key point” is that the public votes according to how they feel, not “what the stats say about the economy, inflation or interest rates”.
“The reality for most people isn’t that they’ll be paying less, but instead they still be paying more and seeing a bigger part of their pay package going on mortgage and other interest payments,” he said.
Mr Tryl added: “Saying to people ‘but you could have been paying even more’ isn’t a very compelling electoral argument.”
And the Liberal Democrats, who commissioned the House of Commons research, said it showed more households face “mortgage misery” the longer Mr Sunak waits to call an election.
The Institute of Fiscal Studies said that while those remortgaging now will get a better deal than a few weeks ago, “they will still face a sharp hike in costs when rolling off a fixed rate”.
Senior research economist David Sturrock told The Independent: “That’s because the interest rates they face are still well above those two to five years ago.”
He said monthly repayments based on interest rates of 5 per cent would be £119 less than at 6 per cent, but still £221 more than the 3 per cent interest rates typically seen two years ago.
Simon Pittaway, senior economist at the Resolution Foundation, told The Independent that mortgage rates spiked during Trussonomics under Mr Sunak’s predecessor. They peaked last year amid a slew of Bank of England interest rate hikes.
And Mr Pittaway said that while mortgage rates falling is good news, “households having to remortgage this year should be under no illusions that they’ll be getting a cheaper deal”.
The New Economics Foundation think tank said households renewing fixed-term mortgages this year will still face “far higher” bills than they would have been paying.
“Although mortgage rates are falling slightly, they are still much higher than they were for many years prior to the disastrous Truss mini-budget just over two years ago,” it said.
Mr Sunak ruled out a spring vote and raised the prospect of a lengthy and bitter campaign last Thursday when he confirmed it was his “working assumption” that he would call the election in the second half of the year.
Conservative polling guru Robert Hayward told The Independent that the PM was “wise” to wait in the hope of an economic revival.
The Tory peer thinks the “general perception” of the Tories could improve because of the slightly rosier outlook for first-time buyers. “The longer you can put between the Truss period and the election the better for the government,” Lord Hayward said.
The Tories would need a major rebound to catch Labour in the polls, with Sir Keir’s party commanding a 19-point lead. It is the biggest lead a year out from an election for any party since Sir Tony Blair’s landslide 1997 win.
And mortgage broker Lewis Shaw, of Shaw Financial Services, told The Independent: “The notion that the electorate will celebrate with glee at being made slightly less poor than they would have is for the birds.
“That’s akin to only getting whipped twice a day rather than the normal three. The current government has directly and consciously contributed to the crisis millions of households are facing and the crisis millions are already in.”
Labour piled on the pressure over rising mortgage bills— (PA)
Liberal Democrat Treasury spokesman Sarah Olney warned the longer Mr Sunak waits to call an election, the more families will face “mortgage misery”. “People are seeing their monthly mortgage payments go up by hundreds of pounds a month, while the government is bogged down in endless chaos and infighting,” she said.
Labour’s shadow chief secretary to the Treasury, Darren Jones MP, said: “Interest rates beginning to fall is good news but the 197,000 homeowners coming off fixed-rate mortgages this month alone will still experience huge hikes in their monthly payments, which are typically set to increase by £240.”
Darryl Dhoffer, of The Mortgage Expert, said: “The Tories are trying to paint falling rates as a victory lap, but for many mortgage holders, it’s more like a sucker punch disguised as a glove tap.
“My clients who locked in at historically low rates three years ago are now staring at a doubling of their monthly payments. Falling rates won’t help them dodge that uppercut.”
Craig Fish, managing director of the brokerage Lodestone, told The Independent: “People are now, or soon will be, paying more than ever for their mortgages and daily expenses, leaving a bitter taste that only a change in government seems likely to remedy.”
A Treasury spokesman said: “Interest rates are high across the developed world as economies work to tackle high inflation and the UK is no different. But now inflation has halved, the economy is turning a corner – starting with tax cuts for 27 million people this month, saving the average earner £450 a year.”
