Martin Lewis claims that the mortgage sector’s time bomb is now about to detonate.
Martin Lewis, an advocate for consumers, claims that the mortgage ticking time bomb he previously warned about is finally exploding.
The creator of MoneySavingExpert.com admitted to a “mortgage ticking time bomb” on ITV’s Good Morning Britain.
And I’m afraid that time bomb is already exploding, he continued.
According to Mr. Lewis, if interest rates remain high for three or four years, consumers will need to reevaluate their financial situation.
He claimed he did not see a mortgage rescue plan being implemented.
Mr. Lewis made his remarks as data from Moneyfactscompare.co.uk revealed that the typical home mortgage rate for a two-year fixed rate on the market increased to 6.07% on Tuesday from 6.01% on Monday.
Currently, 5.72% is the average five-year fixed rate contract. The average rate on Monday was 5.67%, so this is an increase.
Since Monday, there have been fewer mortgage options accessible—there are now 4,641 residential packages available, down from 4,683 on Monday.
Mr. Lewis discussed how he shared his opinions at a mortgage conference hosted by Chancellor Jeremy Hunt last year on Good Morning Britain.
“I talked about banks increasing their margins, which means they’re raising mortgage rates while holding back on raising savings rates, so they can earn more money,” he said.
And what we really need right now is political pressure, either gentle or strong, to tell them: “Either you improve things for mortgage holders, or you improve things for savers, or best of all, you improve things for both.”
But we had many banks sitting there nodding, he said.
“And many of the options I proposed, like changing your term, taking a payment holiday, temporarily lowering your payment amount, or switching to interest-only, they contended that you could already do.
“But the fact that they didn’t make that simple is my biggest issue.
“In that meeting, I suggested that such things should first be made reversible so that if you can do it briefly, you can go back without encountering any issues. That is not the case.
“And second, they need to take into consideration limiting the impact on people’s credit scores because that scares people into not acting because they fear losing access to other types of financing for six years, but once more, that hasn’t happened.
So a little bit more communication with borrowers was the summit’s end outcome.
Giving people adaptable tools is important, Mr. Lewis continued.
And this is crucial because, in the end, there isn’t much we can do to safeguard individuals.
People will need to make financial adjustments if interest rates remain high for three or four years.
“There is nothing else we can look at; they will need to reevaluate their financial situation. What a nightmare that will be.
Even if the government wanted to, I doubt it would introduce a mortgage rescue package.
“Let’s be clear about this: The entire purpose of raising interest rates is to drain the economy of money.
“You accomplish it by reducing people’s available funds.
So in a way, raising interest rates and making mortgage payments more difficult is having the desired impact.
“And what we seen last winter and will see going forward is that energy costs are so high that they effectively drain the lowest and low to moderate earnings of their money and disposable income.
“And now that mortgage costs are rising, many middle- and middle-to-high earners will feel the pinch.
“We raised interest rates because we are taking money out of the system.
“I just believe that we need to consider very seriously about whether or not we really want to treat people that way and force the economy to contract by that much.
And keep in mind, as I said at the mortgage summit, that the impact on mortgages has a significant spillover effect for many renters, who are currently seeing record percentages of their discretionary income go towards rent, making that unaffordable.
And we’re in serious peril. And I believe the entire purpose of what I requested in October and the reason we met in December was that you needed to develop preparations and put some crisis-mitigation measures in place before the crisis even occurred.
“Because once you act, it’s already too late when you’re in a situation. We held that meeting, but we didn’t follow through.
Mr. Lewis added in regards to mortgage rates: “There is no requirement that they must decrease, but I do believe that for the foreseeable future, the thought of them returning to where they were does not look on the cards.
“In fact, the current forecast for interest rates indicates that they will continue to grow; the UK base rate is currently at 4.5% and will eventually reach 5.5% or 5.75%.
“These increases are now taken into account by the fixed rates you are viewing, so they might decrease slightly.
“However, if interest rates are likely to stay at 5% over the long term, fixes won’t decrease.
“No crystal ball predicts that it must come down. I’m not saying it won’t, but I’m not sure either.
According to him, switching to a variable arrangement in the short term with the hope that fixed rates will decline may be a tactic for some, but it carries a risk if fixes keep rising.
He continued, “What I would advise is for anyone who is having trouble to go to a good mortgage broker since it is their duty to walk you through the options.
“Speak to your lender as soon as possible if you can’t pay.”