Tory MPs warn mortgage crisis could cost them elections
Tory MPs are warning of an "interest rate catastrophe," claiming that the party has underestimated the impact of soaring mortgages.
Tory MPs are warning of an impending "interest rate catastrophe," claiming that the party has underestimated the impact of soaring mortgages.
Last week, Santander warned mortgage brokers that it will cease accepting new applications for its "new business" residential and buy-to-let fixed and tracker rates until June 14.
The construction of new homes is being cut back in the UK amid indications that buyers fear a spike in mortgage rates over the next few months.
With interest rates on the rise in the Bank of England this week and significant mortgage lenders increasing their own rates in recent days, Conservatives are growing concerned about how this will affect their campaign in the upcoming elections.
Lucy Allan, the Tory MP in Telford's typically marginal area, questioned her party's stance on the matter, claiming that her party may not have fully understood the catastrophe at hand. “People [are] telling me their monthly mortgage payment is exceeding their salary," something Allan called "unsustainable" after announcing she would not run again in the next election.
Other Conservatives said they hadn't seen many cases yet, but that the problem may worsen later in the year.
While ministers are fully aware of the situation, Rishi Sunak and Chancellor Jeremy Hunt are primarily concerned with tackling inflation, making any plan geared to assist families in mortgage distress impossible. "It is very hard because there aren’t many levers we can pull," a Tory member said.
“When you look at what is happening to mortgages, it’s really killing our own people,” another Tory revealed, adding that it feels like "the end of a cycle – 13 years coming to an end.”
According to an alarming analysis from the Resolution Foundation think tank, UK homeowners who reach the end of their fixed-rate mortgage terms next year would face an average £2,900 rise in yearly payments. This year, the average two-year fixed mortgage rate is expected to be 6.25%. This week, a torrent of additional data to back up the fears is expected.
A response to rising rates is another dilemma for Labour, which has prioritized budgetary discipline over all other concerns. It recently cut back a vow to spend £28 billion a year on green investment, instead deciding to gradually build up to that sum. Only the Liberal Democrats have so far supported a specific package geared at mortgage hardship, consisting of a £3 billion "mortgage protection fund" for families facing repossession.
According to the Treasury, in response to the ResolutionFoundation report, “We know this is a concerning time for mortgage holders, which is why the FCA [Financial Conduct Authority] requires lenders to offer tailored support to borrowers struggling to make their payments, and we continue to support mortgage holders through the Support for Mortgage Interest scheme."
“Behind this, though, is global inflation, continuing to eat away at incomes around the world, which is why the single biggest thing we can do to help families is to halve the rate this year.”