Banks offer help to mortgage holders
Following the latest rate rise that saw interest rates hit 5% on June 22 2023, bank bosses met with Chancellor Jeremy Hunt. Rates went up last month to try and tackle inflation which remains unchanged from the previous month at 8.7%
As a result of the meeting, banks have agreed to offer more flexibility to those struggling with their repayments in the wake of the latest rise in rates. Borrowers can temporarily change their mortgage term to allow them to make lower, interest-only repayments for a short time before reverting back to the original terms.
Moreover, those who opt for this change won’t adversely affect their credit score, which it may have done previously.
Anyone who misses mortgage payments or takes a mortgage holiday that pauses their repayments altogether (something commonplace during the pandemic) will still affect a borrower’s ability to secure lending in the future.
Along with agreeing to let borrowers switch to interest-only to help manage their finances, lenders will delay any repossession proceedings for 12 months.
Cost of living crisis explained
The result of high inflation is that we are still in a cost-of-living crisis; not only are mortgages rising for those on a variable rate or coming to the end of their fixed rate period, but energy prices and the cost of goods and services are stubbornly high.
Those who are renting, they may find that their rent goes up as Landlords’ mortgages rise. Some organisations, such as the National Residential Landlords Association (NRLA), lobby for government action. They are calling for the reintroduction of mortgage interest relief and the unfreezing of housing benefit rates and believe that the current interest rate of 5% will result in landlords selling off as many as 735,000 rental properties which will fuel the ongoing supply and demand crisis across the private rented sector, pushing up prices further.
What is the government doing to assist?
Currently, the government won’t step in to support borrowers as this could undermine the battle against inflation. The government instead aims to stick to the current plan and ‘hold its nerve’.
One of the reasons that interest rates have gone up is to reduce people’s disposable income. So offering more support for mortgage holders could be counterproductive and work against the Bank of England’s policy. Rising interest rates can also reduce economic spending by boosting the incentive to save money. However, this provides little comfort to those unable to make ends meet.
What does this mean for my mortgage?
The average two-year fixed-rate mortgage is currently at 6.19%. According to financial data firm Moneyfacts, the five-year rate is about to hit 6%.
Following the latest rate rise, the average two-year tracker mortgage rate rose to 5.66% from 5.49%. Compare this to June 2022, and rates were half that.
Recently MPs have criticised banks for failing to pass rate rises on in full to savers with easy-access accounts – something that we hope will change shortly.
These latest changes will make a big difference to those at risk of losing their homes because they fall behind in their mortgage payments.
In addition, it will help those who have to change their mortgage because their fixed rate ends, and they’re worried about the impact on their family finances.
Get in touch with Mortgage Hub to discuss your requirements
If you would like to find out about these latest changes and how they could affect you, contact our mortgage specialists at The Mortgage Hub. Our team are available Monday to Saturday on 01698 200050 or e-mail firstname.lastname@example.org