Interest rates will compel banks to provide mortgage assistance, claims Labour
According to Labour, the government should compel banks to assist homeowners having trouble making their mortgage payments.
To ease the issue, borrower Rachel Reeves, the shadow chancellor, suggested allowing them to temporarily switch to interest-only payments.
Many lenders currently do this, but Labour claims that it should be made mandatory everywhere.
Ms. Reeves said that substantial financial support for mortgages was a bad idea since it might lead to price increases.
“A big fiscal injection of cash into the economy, especially an untargeted injection, would not be the right approach,” she said on the Today programme on BBC Radio 4.
It comes ahead of a subsequent hike in interest rates that is predicted, which would result in additional payment increases for mortgage holders.
According to Ms. Reeves, the Labour Party’s proposal to reduce the mortgage penalty “offers immediate assistance, while our dedication to fiscal responsibility and economic growth will secure our economy for the long term.”
On Friday, Chancellor Jeremy Hunt will meet with bank executives once more to discuss possible financial assistance. The actions that Labour wants to make necessary have already been requested by him from lenders.
He is facing pressure for the government to intervene with financial assistance for households a la Covid.
However, he has rejected requests to reinstate a tax relief that would have reduced monthly payments from Tory backbenchers Sir Jake Berry and Jonathan Gullis.
“Those kinds of schemes, which involve injecting large sums of money into the economy, would be inflationary,” he told the lawmakers.
The Liberal Democrats’ proposal for £300 monthly payments for struggling homeowners, to be paid for by a windfall tax on banks, was also rejected by the government.
Even if the inflation rate is stubbornly high at 8.7%, Downing Street maintains that Rishi Sunak is on track to achieve his goal of halving inflation this year.
The prime minister is anticipated to declare that he feels a “deep moral responsibility” to reduce inflation when speaking at an event on Thursday. He is also anticipated to say, “I’m completely confident that if we hold our nerve, we can do so.”
James Cleverly, the foreign secretary, acknowledged that “not all the levers of control are in the government’s hands” and that the independent Bank of England is in charge of setting interest rates, one of the major instruments for fighting inflation.
Instead, Mr. Cleverly told BBC Radio 4’s Today programme that the government was taking precautions, such as delaying large pay raises for the public sector, and was aware that rising public borrowing may exacerbate inflationary pressures.
Raising interest rates makes borrowing money more expensive and, in theory, encourages individuals to borrow less and spend less, which means price increases should slow down.
Although some analysts have indicated the base rate might go to 5%, it is largely anticipated that the Bank of England will raise interest rates by 0.25% to 4.75% at 12:00 BST.
The Labour strategy involves ensuring the availability of relief measures such temporary interest-only payments and extending the mortgage repayment duration.
The party is also requesting guarantees that requests for assistance won’t have an impact on credit scores and a six-month grace period for homeowners who face repossession.
According to Labour, the government should direct the Financial Conduct Authority, a regulator, to mandate that lenders provide all of these options.
The banking and finance industry’s trade group, UK Finance, issued the following statement: “Over the past year, lenders have assisted approximately 200,000 borrowers who are unable to make their full mortgage payments by offering customised forbearance.
This could be a time of decreased payments, no payments, or a brief changeover to interest-only financing.
“Getting in touch with your lender to learn about your options won’t affect your credit score; however, not making payments will.”