The government has decided against implementing significant financial assistance for mortgage holders due to concerns about potential increases in the cost of living.
According to Chancellor Jeremy Hunt, implementing mortgage relief schemes would “exacerbate inflation rather than alleviate it.”
However, he mentioned that he plans to meet with mortgage lenders later this week to discuss potential assistance they can offer to households facing difficulties due to increasing expenses.
Rising interest rates have led to a significant increase in mortgage expenses for homeowners.
Nevertheless, the government has highlighted its substantial financial assistance efforts, stating that it is currently allocating “record amounts” to support individuals. The government also emphasized that it already possesses targeted tools to provide assistance, such as offering loans to individuals receiving benefits.
According to a spokesperson, households have received an average of £3,300 each to alleviate the financial burdens associated with the rising cost of living.
During a parliamentary session on Tuesday, Conservative MP Sir Jake Berry urged Mr. Hunt to contemplate the reintroduction of a Conservative proposal known as mortgage interest relief at source. Sir Berry expressed concerns about the potential occurrence of a “mortgage bomb” and suggested that this measure could help address the issue.
The Chancellor acknowledged the concern raised about families potentially losing their homes and the potential waste of previous financial assistance efforts. However, he made it clear that the government is not currently contemplating taking such action.
The Chancellor stated that schemes involving significant cash injections into the economy would lead to inflation. While acknowledging the challenges faced by individuals dealing with rising mortgage costs, he emphasized that the government will refrain from implementing measures that could exacerbate inflation and will instead focus on avoiding prolonged inflationary effects.
Mr. Hunt confirmed his intention to hold meetings with major lenders to explore potential assistance they can offer to individuals facing difficulties in meeting higher mortgage payments. He aims to discuss both the support available for those struggling with expensive mortgages and the potential flexibilities that can be provided to families in arrears.
In April, the inflation rate, which measures the increase in prices, reached 8.7%. This indicates that consumer prices, on average, were 8.7% higher compared to April 2022.
As part of efforts to curb inflation, the Bank of England has been increasing interest rates, resulting in higher borrowing costs, including for mortgages. It is anticipated that the Bank will continue to raise rates in the upcoming week and maintain them at elevated levels for an extended period of time.
Anticipating the Bank’s decision, the expectations of an interest rate hike have already influenced the funding costs of mortgages, impacting new borrowers and individuals seeking to remortgage their homes.
Lenders have been swiftly withdrawing mortgage deals and implementing rate increases with little notice. As of Monday, the average rate for a two-year fixed deal surpassed 6%, reflecting the ongoing changes in the mortgage market.
In response to the Liberal Democrats’ proposal for mortgage relief and a mortgage protection fund, Treasury Minister Andrew Griffith expressed concern that such policies would hinder the efforts to reduce inflation.
Labour’s Shadow Chancellor, Rachel Reeves, questioned Mr. Hunt regarding the source of funds for families to pay the alleged “Tory mortgage penalty.” She attributed the increased costs to what she deemed as a consequence of the Conservative mini-budget from the previous year and what she described as 13 years of economic failure.
Source : bbc.com