Afternoon summary
A quick recap
The Liberal Democrats are calling for a £3bn emergency mortgage protection fund to protect people whose homes would otherwise be repossessed, as the UK’s mortgage market continues to tighten.
Sir Ed Davey told the Today Programme:
We’ve already seen the number of people’s homes been reposessed going up massively – surging by 50% in the latest quarter, and my worry is that we’re going to see lots of other families losing their homes, and we could be in a spiral of repossessions.
The banks have got to play a bigger role. They need to step in and help people who are in trouble.
But just as there was before, there needs to be more protection for those who are really suffering and the government just aren’t doing that.
But the idea of bailing out mortgage holders has been criticised, with former Treasury advisor Tim Pitt warning that subsidising mortgage payments would be regressive, and undermine monetary policy.
1/ Inflation. Mortgage payments are one of the main transmission mechanisms the Bank of England has to cool demand. Subsidising mortgage payments acts against that, making it harder to get inflation down. This is terrible economics and bad politics.
— Tim Pitt (@TimPitt11) June 15, 2023
Here’s a breakdown of other options the government could consider:
The cost of fixed-term mortgage rates have continued to rise.
Data from Moneyfacts shows that the average two-year fixed rate increased from 5.92% yesterday to 5.98% today.
The average five-year fixed rate increased from 5.56% to 5.62%.
Expectations of more UK interest rates has pushed up the pound to a one-year high today, with sterling on track for its best week this year.
But higher borrowing costs are adding to the burden on companies, as well as home-owners. The number of companies falling into insolvency in England and Wales has jumped 40% year-on-year, new figures show.
In other news…
Updated
Over in the US, consumer confidence is recovering this month, according to the University of Michigan’s latest data.
It found that consumer sentiment rose by 8% in June, reaching its highest level in four months, reflecting greater optimism as inflation eased and policymakers resolved the debt ceiling crisis.
#US University of Michigan preliminary May #consumer #confidence index 63.9 vs. 60 expected and prior 59.2.
— MacroTourist (@Gloeschi) June 16, 2023
-> Slight improvement, but still in #recession territory pic.twitter.com/nWZwJi7ykC
The survey adds:
The outlook over the economy surged 28% over the short run and 14% over the long run. Sentiment is now 28% above the historic low from a year ago and may be resuming its upward trajectory since then.
As it stands, though, sentiment remains low by historical standards as income expectations softened. A majority of consumers still expect difficult times in the economy over the next year.
Overall a good University of Michigan report. 1-year inflation expectations moved lower to 3.3% while 5-10-year expectations were unchanged at 3.0%. Sentiment, current conditions, and expectations all improved.
— Kathy Jones (@KathyJones) June 16, 2023
