The government has announced that it will not introduce substantial financial aid for mortgage holders, expressing concerns that it could exacerbate inflation and further burden the cost of living.
Chancellor Jeremy Hunt emphasised that mortgage relief schemes would adversely impact inflation rather than alleviate it. However, the government intends to meet with mortgage lenders to explore potential assistance for households grappling with increasing bills.
Many homeowners are currently grappling with soaring mortgage costs due to rising interest rates. The government argues that it already provides significant support, emphasising the availability of specific tools such as loans for individuals receiving benefits.
A government spokesperson also highlighted that households had received an average of £3,300 each to help alleviate the pressure of rising living costs.
During a parliamentary session, Conservative MP Sir Jake Berry urged the consideration of reintroducing the Conservative concept of mortgage interest relief at source, warning of a potential “mortgage bomb” if families are not aided promptly.
Sir Berry argued that the assistance previously provided would be squandered if families lost their homes.
However, the Chancellor dismissed the idea of financial aid, expressing concerns over the inflationary impact of injecting substantial sums of money into the economy. Mr Hunt stated that while sympathising with the difficulties faced by those experiencing increased mortgage costs, the government would not take action that could prolong inflation.
In an effort to combat inflation, currently at 8.7%, the Bank of England has been gradually increasing interest rates. This approach aims to make borrowing, including mortgages, more expensive. It is anticipated that interest rates will rise further in the near future and remain elevated for an extended period.
Before the Bank’s decision, expectations of a rate hike had already influenced the cost of mortgage funding, negatively impacting new borrowers and individuals seeking to refinance their mortgages.
Lenders have swiftly withdrawn deals and raised rates, causing disruption. On Monday, the average rate for a two-year fixed mortgage surpassed 6%.
The Liberal Democrats have joined the call for mortgage relief and the establishment of a mortgage protection fund. However, Treasury minister Andrew Griffith argued that such policies would hinder efforts to curb inflation.
Labour’s shadow chancellor, Rachel Reeves, challenged Mr Hunt, questioning where families would find the resources to pay the “Tory mortgage penalty.”
Reeves claimed that higher costs were a consequence of the Conservative mini-budget introduced last year and the perceived economic failures of the preceding 13 years.
In light of these developments, Chancellor Jeremy Hunt intends to engage with major lenders to explore potential avenues for assisting households struggling with increased mortgage expenses.
The focus remains on finding ways to alleviate the financial burdens individuals face while also considering the broader economic implications and the risk of further inflationary pressures.
