In December Jeremy Hunt hosted a mortgage summit, attended by lenders and the Financial Conduct Authority, to discuss rate woes. At the time, the numbers were at least moving in the right direction. During Liz Truss’s 49-day premiership, the FCA expected interest rates to rise to 5.5 per cent, an increase which was forecast to put 570,000 people into mortgage payment difficulty. Once Rishi Sunak and Hunt undid Truss’s mini-Budget, things looked calmer: a 4.5 per cent peak was expected, and 356,000 people were due to be in difficulty. Hunt was still struck by the figure. Horribly high, he thought.
The Chancellor used the meeting to lay the foundation for regulatory changes that could be used in the future to help struggling mortgage-holders. Now, as interest rates are expected to hit 6 per cent, which would be the highest since 2001, the Treasury is working with lenders to consider repayment holidays, mortgage extensions and moving more people to interest-only payments. Not so long ago 6 per cent was the gloom scenario used by the Bank of England to stress-test mortgages – an eventuality ‘not expected or likely to materialise’. Today, it’s the consensus. Some 1.3 million mortgage-holders are expected to renew their mortgage before Christmas. For many, interest payments will treble.
It’s not hard to predict what happens next: agony for anyone renewing, fear for those a year away from doing so, and despair for first-time buyers who can see the cost of ownership soaring. Panic is setting in. Home ownership is starting to look more like a trap than a ladder.
A whole generation is starting to experience the forces that rattled the economy in John Major’s premiership. Rate rises are crushing disposable incomes, first for renters and now for homeowners.