HSBC announced on Wednesday it will raise the price of its mortgages for the second time in less than a week, in the latest piece of bad news for homeowners.
The bank moved as lenders expect interest rates to rise to 5.75 per cent by the end of the year, following news the UK gilt yields had surged. This last point suggested that the Bank of England will keep interest rates higher for longer amid inflation.
The HSBC announcement follows Santander withdrawing its mortgage deals ahead of repricing them with higher interest rates.
Homeowners have been warned that mortgage rates could surge even higher after the gilt yield figure rose following the data the Office for National Statistics released about the job market.
Lewis Shaw, founder and mortgage expert at Shaw Financial Services, said: “The past few months have been difficult, but we’ve hit top gear in the past week, culminating on Monday with swathes of deals pulled and mortgages repriced upwards.
“I spoke to one broker who said they’re getting anxious opening their email in the morning, and I understand what they meant. The worry is this could get worse before it gets better.”
With the situation looking tough for homeowners, it is worth noting that the Government offers help with paying interest on a mortgage.
What is Support for Mortgage Interest (SMI)?
This is a loan from the Department of Work and Pensions to help pay towards the interest on your mortgage, or a home loan.
The Government will charge you interest but, even though you will pay back more than you borrowed, it could still be cheaper than other ways of borrowing money.
The loan only needs to be repaid when you sell the house or give it to someone else.
Who is eligible for Support for Mortgage Interest?
Those who can apply need to be getting one of the following benefits: income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Income Support, Universal Credit, or Pension Credit.
Citizens’ Advice states that support for mortgage interest can help pay the interest payments for any of the following:
- A mortgage for the home you live in
- A loan to help you buy more of your home
- A loan to help with other costs, such as legal fees or stamp duty
- A loan to pay off your mortgage
Payments will begin around nine months after you claimed one of the eligible benefits (apart from pension credit) — or three months after you claimed Universal Credit. With Pension Credit, the payments begin immediately.
How much Support for Mortgage Interest can I get?
If you claim Jobseeker’s Allowance, ESA, Income Support, or Universal Credit, the Government will pay the interest for up to £200,000 of your mortgage. For pension credit, it extends up to £100,000.
“If you own the home with someone else, you might only get interest for your share of the mortgage,” Citizens’ Advice states.
“For example, if you have a mortgage of £200,000 with your ex-partner, the department might say your share of the mortgage is half the total amount — £100,000.”
Once the department has calculated how much of your mortgage they can pay interest on, they will send it to your mortgage lender. They might take off money if you are earning from work, have a mortgage-protection policy, or further income, such as a lodger.
You will typically pay 3.03 per cent interest on a SMI loan, although that rate is subject to change.
For more information, visit the Government’s Supply for Mortgage Interest portal.
