I beg to move,
That this House
is extremely concerned that, under this Conservative Government, average mortgage costs will be increasing by £2,900 per year, with a typical household in the UK paying over £2,000 more per year than in France and over £1,000 more than in Ireland and Belgium, and that renters face huge increases in rent payments;
condemns the Government for its slowness in acting to support millions of homeowners and renters and so alleviate the impact of its policies;
calls on the Government to bring in mandatory measures, as the current voluntary measures could lead to around one million homeowners missing out on support, and to immediately adopt measures to ease the mortgage crisis and halt repossessions by guaranteeing support from lenders for struggling mortgage borrowers and strengthening the rights of renters;
in particular calls on the Government to require lenders to allow borrowers to switch to interest-only mortgage payments for a temporary period, to lengthen the term of their mortgage period, to reverse any support measures when requested and to make mandatory repossession restrictions;
and further calls on the Chancellor of the Exchequer to instruct the Financial Conduct Authority to urgently issue guidance that the credit score of borrowers should be unaffected by any temporary switches to interest-only mortgage payments or lengthening of their mortgage period and to introduce a renters’ charter that would end no-fault evictions immediately.
Throughout Britain, families are experiencing the harsh, rolling impacts of the Tory mortgage bombshell. Last autumn, the Tories’ mini-Budget crashed the pound; they trashed our economic institutions and left our country’s reputation in tatters, with higher mortgage rates as the consequence. The current Prime Minister and the latest Chancellor have not turned the situation around. For families across Britain, things are getting worse, not better. The Prime Minister is now lecturing the country to “hold our nerve”. It is easier to hold your nerve when you do not have to pay the price of the Tory mortgage bombshell.
What are the consequences? Millions of households will be hit by the bombshell, paying, collectively, a total of £15.8 billion more in mortgage payments by 2026. That will be an additional £240 per month, on average, for those re-mortgaging. In the constituency of the Chief Secretary to the Treasury, John Glen, the figure is higher still, with 9,700 households there facing payments, on average, of £280 per month more—or £3,400 per year. People can hold their nerve all they like, but how does the Minister think that is going to pay the mortgage or the rent?
My right hon. Friend is making a good introduction. Is it not the case that all this money that will be lost by households does not go to help anyone but the Tories’ friends in the banks, who, of course, have presided over those neo-liberal policies that trashed our economy?
I thank my hon. Friend for that intervention. I will come on to the ways in which we can better protect people, but many banks are doing the right thing and trying to support their customers. It is important that all lenders take the action that is needed, which is why we need the Government to make that charter a requirement, not a voluntary agreement.
These devastating increases in mortgage rates will damage people’s plans for the future and deny many their dreams. In plenty of cases, they will mean more lives and hopes ruined. Citizens Advice said this week that many of its clients with mortgages have seen their finances “fall off a cliff”, with more and more people struggling to afford the essentials, such as food and heating. But it is not their fault: they have done nothing wrong.
For James, from Selby, the Tory mortgage bombshell is going to cost him and his family £400 more each month. That is nearly an extra £5,000 a year, but he cannot find that money and so he and his family have no choice but to sell their house and downsize. He has just told his children that they are going to have to start sharing bedrooms because they cannot afford to live in their home. Can the Minister explain why James and his family are having to pay the cost of this Tory Government’s failures?
My right hon. Friend is making excellent remarks. Does she agree that this situation is having a devastating impact not only on people with mortgages, but on renters, because landlords are passing on the costs to them? Does she agree that we need no-fault evictions to be scrapped immediately?
I very much thank my hon. Friend for that intervention. She is absolutely right: the people being hit are those who are having to re-mortgage; those who are on floating rates and are just seeing their payments automatically go up; first-time buyers who want to be on the housing ladder but, because of this bombshell, are not able to get on it; and renters, who are paying the higher mortgage payments of their landlords. She is right to say that we need Labour’s renters charter, in order to do a number of things, including ending no-fault evictions.
Families facing the increasing squeeze from their rising mortgages are now having to confront that stress and anxiety day in, day out. For many, this will mean that their family holidays are cancelled this year; they will watch hard-earned savings drain away; and they will decide that they can no longer afford to spend money on days out with friends and family. For others, it could be much worse, with them not moving up the housing ladder, but slipping down it, through no fault of their own. The scale of the impact of all of this is devastating.
I commend the right hon. Lady and the Labour party for bringing this debate forward. Every one of us, including my constituents, is dealing with the same problems. Some people contacted me last week to say that their mortgage rates are going up from £400 to £800, while others have said that theirs are going up from £600 to £1,200. It is just impossible to find that amount of money. Does she think that perhaps the Government—I look to them when I say this—should be looking at mortgage tax relief? That is one direct method of helping people to retain their houses and their dream of home ownership, and to survive this crisis.
The hon. Gentleman speaks powerfully and I recognise those stories of people seeing their mortgages double because of what is happening. I will come on to the solutions proposed by the Labour party, but it is important that money is not injected into the economy at this time. If that happened, interest rates would go up even more, crippling the hopes and opportunities of exactly those we want to help. I will come on to the solutions that we propose shortly.
Over the next few years, 7.5 million families will be hit by the Tory mortgage bombshell, month after month after month. That is why it is essential that greater mortgage flexibility and support from lenders must be mandatory, not voluntary as the Government have put forward.
Consumer champion Martin Lewis warned the Government about mortgage market issues last year, and he now says “the timebomb has exploded”, yet under the Government’s scheme, 1 million households are missing out. What is the Government’s response to them? Tough? It is up to the discretion and the goodwill of their lender? That is not good enough.
Although it is welcome, as I said, that many lenders are stepping up and doing the right thing, the scheme cannot be voluntary. That is why, when Labour set out our mortgage package last week, we made sure that that would be compulsory, across the board, and required of lenders. That is right: required of lenders. Without that clarity and confidence, families are rightly anxious about what comes next and how it will affect them.
My hon. Friend is making an excellent speech, highlighting the real situation facing many of our constituents as we sit here today. In my constituency, 9,000 families will see a mortgage increase of up to £1,400, on top of struggling to put bread and butter on the table and keep up with energy costs. All we hear from the Prime Minister is that they should hold their nerve. Frankly, that is rich coming from somebody who is never going to be in that position. Does my hon. Friend agree with me that rather than finding solutions, what this Tory Government and the Prime Minister are demonstrating is that they are completely out of touch with people’s real problems today?
My constituent’s mortgage has gone up from £1,950 to £3,000. She spent an agonisingly stressful time waiting for that deal to come through, but if she had made the deal today, it would have been £3,500. Does my hon. Friend agree that that is too much stress for one family to take?
My hon. Friend is absolutely right. People who live in Hornsey and Wood Green, where house prices are high, will see a big increase in their payments. When rates go up from below 2%, which is what many people were paying, to above 6%, there will be huge increases. It is through no fault of my hon. Friend’s constituents, or any of our constituents, that they are in that position, which is what is so frustrating.
I remember a time—you may as well, Madam Deputy Speaker—when the Tory party used to preach personal responsibility, yet this Government are taking no responsibility for the devastation that they have caused. Where is the apology for the Tory mini-Budget? Where is the apology to those paying hundreds of pounds more a month in mortgage payments, or to those at risk of losing their homes? There is nothing.
Let us just imagine for a moment that a group of people working in an office, a supermarket or a factory burn the place down. Everyone else who works there is told that they have to pay to clean up the mess and that that payment will carry on for years. The next day, the arsonists turn up to work again, expecting to be paid as normal and, not only that, they are furious if someone even brings up the incident of the fire with them. That would be preposterous and outrageous, and yet it is precisely what the Government are doing. “Inflation? Oh, that was nothing to do with us. It was all global events. It was those public sector workers asking for a pay rise. It was the Bank of England. It definitely was not anything to do with us.” That is what we hear from this Government. Well, we know what the Tories did last autumn was totally outrageous. The country will not forgive or forget the scale of the harm that the Tories have caused to the economy and to families up and down our country.
The Government say that this is happening everywhere, so let us look at what is happening in Europe. The latest data comparing interest rates among our European neighbours show that a household in Britain, with a £200,000 mortgage, is now paying over £2,000 per year more for its mortgage than in France, over £1,000 a year more than in Ireland or Belgium, and £800 more than in Germany. That impact on families in Britain reflects the choices made by this Tory Government.
To make matters worse, after 13 years of the Tory Government being in power, average real wages are still lower than they were in 2010. Many families have faced one financial pressure after another. Energy bills are twice as high as a year ago. The weekly food shop is astronomical. On top of all that, higher mortgages and higher rents are the last thing they needed. No one is reassured by the suggestion from the Prime Minister that he is “100% on it”. After 13 years in power, it is clearer by the day that the Tories are the problem, not the solution.
The truth of the matter is that we have the highest inflation in the G7, with core inflation rising and interest rates rising too. We are in a weaker position than many as a consequence of Tory choices that have left our economy lacking resilience and security in the face of shocks, including global ones. Banning onshore wind, closing our gas storage facilities and scrapping the home insulation programme have all contributed to higher bills, higher costs and less security.
A patchwork Brexit deal full of holes is making goods such as food more expensive, with the prospect that that could get worse at the end of this year, with new import checks and costs. What is the Government’s latest idea? One of the Chancellor’s economic advisers called last week for the Bank of England to “create a recession”, adding:
“They have to create uncertainty and frailty."
Will the Minister tell us whether the Chancellor agrees with that advice from his advisers? If not, why is taking advice from them?
A Labour Government would be built on the firm foundations of economic responsibility, with strong fiscal rules. We would negotiate a bespoke British food and farming agreement with our trading partners, while staying out of the single market and customs union. We would lift the ban on onshore wind and reform antiquated planning rules, working in partnership with businesses and trade unions to invest in the jobs and industries of the future, protect our energy security and reduce our energy bills. That is what is needed to get our economy on sustainable and stable path, so that families are not grappling with a cost of living crisis created by this Tory Government.
If ever there were proof that the Government do not have the answers that our country needs, it is what is happening on housing. The Conservatives once claimed to be the party of home ownership: not any more. Home ownership is falling. It is not because of just their failure to require lenders to provide mandatory support for mortgage holders, although that would certainly help today. Incredibly, the Prime Minister has scrapped house building targets in the face of pressure from some of his councillors and Back Benchers. The consequence of the Tory Government’s policy is now to push the prospect of home ownership for young people and families starting out in life even further away.
My right hon. Friend is making excellent points, particularly about young people being priced out of the property market. Does she agree that we need to overhaul the housing system to include better rights for renters and more council housing?
My hon. Friend makes a really important point, because the Tory mortgage bombshell is experienced whether people have a mortgage or not. Renters are seeing huge increases in their rents—on average 10% in the last year—in Liverpool and around the country. That is why Labour’s renters charter is so important right now.
Treasury Ministers remain ignorant or indifferent to the plight of the renters whom my hon. Friend spoke about. A Labour Government would bring in a renters charter, ending no-fault evictions, and introduce a four-month notice period. Renters right now are exposed to their landlords passing the higher costs of their mortgages on to their tenants. Yet it is not clear whether the voluntary package, which the Chancellor described yesterday, includes buy-to-let mortgages. Will the Government tell the House and the country what they think the consequences of that will be? Labour would rebalance the housing market towards first-time buyers and towards renters. We would bring in a comprehensive mortgage guarantee scheme, stopping overseas investors buying whole developments off plan, and introduce our tough private renters charter.
The Tory mortgage bombshell could not come at a worse time for family finances—right in the middle of a cost of living crisis. Our country is being made to pay the growing price of Tory economic failure. People cannot afford this Tory Government. We have seen mistake after mistake, wrong decisions taken for the wrong reasons, and the Government never standing up for working families and refusing to take responsibility for the problems that they have created. The only thing that the Tories have to offer is desperate excuses for the state of the country after 13 years of their Government.
At the next election, people will be asking this question: are me and my family better off after 13 years of Conservative Government? The answer to that is a resounding no. The last thing that our country needs is this Tory mortgage bombshell. The country needs security for working people. That is what Labour will deliver. We are on to the third Prime Minister of this Parliament. If this Government had any decency, they would call a general election and let the people decide who they want to stand up for them and lead our country.
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“welcomes the Government’s drive to halve inflation, grow the economy and reduce debt;
particularly welcomes the Government’s new Mortgage Charter which has been agreed by 85 per cent of the residential mortgage market and will provide support to mortgage holders through new commitments and flexibilities to help borrowers who are anxious about rising interest rates;
notes the extensive package of cost of living support to help families with rising prices, worth an average of £3,300 per household including direct cash payments to the eight million most vulnerable households;
and further believes that Labour’s policies to manage the economy would be inflationary, lead to higher interest rates and put more pressure on mortgage holders and renters.”
After two decades of low inflation, the world has been confronted with a bout of fast-growing prices, and we are not alone. As a result of rising prices, central banks around the world, including in the United States, Japan, New Zealand and the European Union, have been raising interest rates in order to force down the rate of price rises. As all Members will be aware, last week, the Bank of England’s independent Monetary Policy Committee raised rates to 5%. Let me say at the outset that the Bank of England and its Monetary Policy Committee has the full support and confidence of this Government, and will continue to do so as it takes whatever action is necessary to return inflation to the 2% target in the medium term. As the Chancellor was clear when addressing this place yesterday, he will not take action that undermines the Bank of England’s monetary objectives.
The Minister will be aware that the latest data on mortgage rates specifically shows that, since the mini-Budget, they have increased faster here in the UK than in the US. That gap in mortgage rates means that someone here with a mortgage of £200,000 will be paying £1,000 a year more than in the US. What is the Minister’s explanation for that?
I am here to account for what has happened in the UK. Obviously, there are differences—[Interruption.] If I may answer. There are differences across the EU and the US. What I am telling the House, which is quite transparently clear, is that inflationary pressures are affecting all economies at the moment, and it is my responsibility to account for what we are doing as a Government.
I wish to make more progress.
Where there are non-inflationary measures that we can take to relieve the anxiety faced by families, we will do so and we will do everything we can to address the situation. That is why, on Friday, the Chancellor met the UK’s principal mortgage lenders, alongside senior representatives from the Financial Conduct Authority and UK Finance, to agree new support for those struggling with their mortgage payments.
I will come on to set out in detail what arrangements we have made. As the Chancellor set out pretty clearly yesterday, we will hear in the next couple of weeks the details of that agreement, which includes a growing number of lenders—it currently covers 85% of lenders in the country.
I wish to make some more progress and then I will take some interventions in a moment.
At that meeting on Friday, the Chancellor secured agreement from lenders to a new mortgage charter, which we published yesterday. It sets out what support customers will receive. We are proud to say that, over the weekend, more lenders signed up to the charter, and we encourage further lenders to join that 85% of mortgage market providers.
The charter provides support for two groups of people in particular. The first group is those who are worried about their mortgage repayments. If they want to switch to an interest-only mortgage or extend their mortgage term to reduce their monthly payments, they will be able to do so with the option of switching back to their original mortgage deal within six months without a new affordability check or affecting their credit score.
For most people, the right course of action will be to continue to make payments on their current mortgage. Keeping up full repayments means that they will pay less interest overall. But this new measure means that people will be able to opt for a lower-cost approach for six months with full reversibility, giving them the peace of mind of knowing that they can try out a new approach and still change their mind later on.
I thank the Minister for giving way. He is being very generous with his time.
With not all the mortgage market covered by the charter, there is a worry that around 1 million households could miss out on the support. Can the Minister guarantee that the measures that were outlined will be available to everyone struggling with their mortgage payments, not just those who happen to have a mortgage with one of the banks that is on the list of those that have cosy chats with the Chancellor?
I hope that more and more lenders will be added to those 85% of providers. The details will be known in the next few weeks. This comes on top of the FCA’s rules around lenders having to take an individual approach to the circumstances of their customers, especially those trying to find a way through when they fall into difficulty.
No, I wish to make a bit more progress. I will come back to the hon. Lady in a moment.
This measure will take effect in the next few weeks and it means that a homeowner with £100,000 outstanding on their mortgage over 15 years can change their payments—with no impact on their credit rating—by extending the mortgage term by 10 years, which could save them over £200 a month, or by moving to interest-only payments, which could save them more than £350 a month. A further measure for this group of customers means that, if they are approaching the end of a fixed-rate deal, they will have the chance to lock in a new deal with the same lender up to six months ahead. However, they will still be able to apply for a better like-for-like deal with the same lender, with no penalty, if they find one when their current deal ends.
I understand why the Minister wants to have a voluntary charter, but does he agree that what we are actually seeing from the banks—this was raised on the Treasury Committee—is that they are very quick to raise interest rates on mortgages, but not so quick to raise them on savings? The difference between the interest rates being raised on mortgages and those being raised on savings is around 50%, which is completely unfair. When the Chancellor meets the banks, will he also add to the conversation the unfairness that exists when it comes to interest rates on savings? That is why I am reporting back to the Minister on the need to mandate this—because we cannot always assume that the banks will act in the interests of their customers.
I thank the hon. Lady for her point. As the Chancellor said yesterday, he did raise that with lenders on Friday. We will continue to work closely with them on those disparities where they exist. My colleague the Economic Secretary to the Treasury, who is responsible for the relationship with financial services institutions, will also be attending to this issue. It is right that, with interest rates rising, banks should be looking to put as much of that rise as possible on to the savings rates that they offer to consumers.
Time and time again the Minister seems to be ducking the central issue in this debate, which is that the charter the Government have proposed will not cover millions of people and will not provide support. Why will he not instead subscribe to the Labour position today and require all lenders to do it, so that everybody can get support? Answer the question Minister.
I appreciate the passion with which the hon. Gentleman presents his point, but we have made an agreement with the FCA and with lenders, and in the next couple of weeks the details will be available for consumers and mortgage holders up and down the country. As I say, we have already moved from three quarters to 85% of lenders and I expect others to join in due course. We will continue to have dialogue with the FCA and to look at further ways to help consumers.
The purpose of our intervention is to provide people with more flexibility and optionality to find the best deal for their circumstances. Mortgage arrears and defaults remain at historically low levels, with less than 1%—I think it is 0.86%—of residential mortgages in arrears in 2023, a lower level than just before the pandemic.
My hon. Friend makes a wise point, and I will come on to talk about some of the other measures in a moment. For those families involved, it is extraordinarily distressing to lose their home, so we will do all that we can to support people who find themselves in such a challenging financial position.
No, I am going to finish answering the previous point.
As part of our strong regulatory framework for mortgage holders, banks and lenders already provide tailored support for anyone struggling, and they deploy highly trained staff to help those customers. Support offered includes temporary payment deferrals and part interest, part repayment, as well as extending mortgage terms or switching to interest-only payments. To supplement that, we agreed as part of the mortgage charter on Friday that, in the extreme situation in which a lender is seeking to repossess a home, there will be a minimum 12-month period from the first missed payment before there is a repossession without consent. I believe that that goes rather further than what the Opposition were suggesting.
This crisis is already having an impact on renters too, and the Chief Secretary is not touching on that in his speech. I have a constituent on a rolling private tenancy who is worried sick that her landlord is going to evict her. She is worried about ending up in a hostel with her teenage daughter. She works full time and pays her way. That situation is shared by so many. Does the Chief Secretary not agree that there should be support for renters, and that the way to achieve it is to back Labour’s renters charter, including the halt to no-fault evictions and a four-month notice period for landlords?
I do not accept that, but I do accept that there are challenging situations for our constituents up and down the country. That is why this Government have intervened and are working in this way with lenders to find a constructive package of interventions to meet the situation those constituents are in.
Anyone who is worried that they could be in those difficult situations should know that they can call their lender for advice without any impact whatsoever on their credit score. Lenders will also provide support to customers who are up to date with payments to switch to a new mortgage deal at the end of their existing fixed-rate deal without another affordability test, and provide well-timed information when their current rate is coming to an end. Taken together, those measures should offer some comfort to those who are anxious about the impact of high interest rates on their mortgage and provide support to those who get into extreme financial difficulties.
May I return briefly to the point made by my hon. Friend Barbara Keeley? Last time I asked the Economic Secretary to the Treasury about the number of renters estimated to be impacted by this situation, he did not have an answer. Do Ministers on the Treasury Front Bench have an answer today on how many renters will be affected by this crisis?
The interventions we have made provide significant scope for assistance. To find an accurate number would be very difficult, but we will continue to work with industry and with lenders to find maximum flexibility and interventions to support them at this difficult time. While we roll out those measures, tackling inflation remains the No. 1 priority of the Prime Minister and the Government. Inflation makes every person in this country poorer and it has to be tackled head-on.
Notwithstanding that, I am fully alive to the fact that some people remain in real distress. I assure hon. Members and their constituents that we will always stand ready to help where we can. That is why at the Budget we announced that the energy price guarantee would be extended for a further three months. That extension was funded in part by the energy profits levy that this Government introduced last year, recognising that profit levels in the sector had increased significantly due to those very high oil and gas prices, caused by global circumstances—including, of course, Russia’s invasion of Ukraine.
Alongside holding down energy bills, freezing fuel duty, increasing universal credit and raising the national living wage and pensions, we are giving up to £900 in cost of living payments to households on means-tested benefits. Taking those measures together, the Government are already supporting families with one of the largest support packages in Europe, worth £3,300 per household on average.
The Government’s approach makes targeted interventions to protect the most vulnerable, while maintaining a laser-like focus on tackling inflation. I believe that that stands in sharp contrast to some of the policies offered by opposition parties. The Liberal Democrats are calling for a £3 billion mortgage protection fund, which would simply pour fuel on the fire of inflation, making it harder to bring prices down. That would be such a damaging move that it is apparently even too extreme for those on the Labour Front Bench to contemplate.
However, I would say that the Labour party is not without its own flaws when it comes to offering unfunded inflationary policies. The media reports that Edward Miliband has had his wings clipped by the Leader of the Opposition for his excessive spending proposals, but in reality the shadow Chancellor is only slightly delaying Labour’s £28 billion spending spree to the second half of the next Parliament—an amended timetable, but the same reckless policy.
We said that we would halve inflation, not because it was an easy thing to do, but because it was the right thing to do. History and the best economic insights that we have today tell us that the best way to beat inflation is to stick to our plan, backing the Bank of England’s monetary policy decisions. We will stick to the plan, because it is the only way we can give relief to families and reprieve to businesses. As we have done before, we will face down these economic challenges while supporting the most vulnerable and setting us up for economic growth.
Since a Conservative Government came into power in 2010, the UK economy has grown more than those of major countries such as France, Italy, or Japan, and about the same as Europe’s largest economy, Germany, which is now in recession. We have halved unemployment, cut inequality and reduced the number of workless households by 1 million. We have protected pensioners, those on low incomes and those with disabilities. We will now overcome this inflationary period, and offer a helping hand to those who need it as we do so.
Before I call the SNP spokesperson, I think I will have to give some firm guidance about time limits. My initial guidance would be six minutes, just so the first speaker on the Government side is aware.
Rachel Reeves raised the spectre of those commentators who are suggesting that we crash the economy into recession as a way of tackling inflation. Others have commented on that over the past week or so. The more that I think about it as a serious proposal, the more hideously grotesque it appears that, in the midst of all this, there are people out there, swarming around with daft ideas, suggesting that poverty and penury are actually an economic tool.
“the Government’s drive to halve inflation, grow the economy and reduce debt”.
Inflation is not halving; it has stayed at 8.7%. Core inflation has gone up to 7.1%, real gross inflation is at 18%, and the debt to GDP ratio has hit 100%. I know that politics is politics and that there are things Ministers will have to say, but if they bear little resemblance to reality, they are unlikely to believed.
I am thinking of some of the very early contributions to debate. Paul Holmes, who is no longer in his place, referred to other people’s plans. I think it is just extraordinary to listen to Tories being critical of anyone who simply thinks that people having a warm, dry and affordable house for themselves and their family is anything other than a rather sensible ambition.
According to Moneyfacts, the average two-year fixed-term mortgage is now sitting at 6.23%, not far off the post-mini-Budget peak of 6.6%. Although it is true that, on Friday, the UK’s biggest lenders signed a deal that included, as part of this new mortgage charter, a commitment to give homeowners a 12-month grace period before their home is repossessed—I welcome that and the other measures—the deal actually forms a rather limited relief package that certainly will not offer help to everyone who needs it. That came after the Bank of England raised interest rates to 5%—the 13th consecutive rise, and a larger-than-expected increase—meaning that we now have the highest interest rates in 15 years.
I support 100% the operational independence of the central bank, but I wonder whether that was the right approach. We all know that there is a lag between interest rates going up and the impact of driving inflation down being demonstrated. I wonder whether we are repeating a mistake that we have seen many times in this country: interest rates not rising quickly enough at the beginning, and continuing to rise too late at the end, turning a bad situation into a recession, or making a recessionary situation worse than it need be.
The pledge on forbearance is one of the main measures in the agreement struck with lenders. The lenders that have agreed the pledge include NatWest, Lloyds, Santander and Barclays, which, as the Chief Secretary to the Treasury said, control 75% of the market—that figure has increased to 85%. As we have heard today, as well as in yesterday’s statement, that agreement does not cover all the lenders, nor does it cover all mortgage-holders, some of whom are in very specific circumstances. We heard from a colleague yesterday about people who have residual Northern Rock mortgages and are tied into specific deals. It would be helpful to find out, for example, whether they will be able to take advantage of the opportunities that the charter allows for. The SNP welcomes what has been said so far, but it is clear that the mortgage charter will offer limited relief to the millions of households across the UK who are facing soaring mortgage costs.
Let us look at the detail. As I said, the average two-year fixed-term mortgage is now sitting at 6.23%, not far off the 6.65% peak. The average five-year fixed-term mortgage is at 5.86%. Those rises mean that, at the two-year rate, repayments on a £150,000 mortgage—not far off the £184,000 average price of a house in Scotland—are now £990 a month, compared with £660 a month on the average rate available in December 2021, before the hike in borrowing costs began. From £660 a month to £990 a month is a 50% rise in two years. That is a huge amount of money: it amounts to an increase of £3,900 a year compared with December 2021. We know that wages have not kept pace with inflationary costs, and that the people who are struggling with this have also been struggling with soaring energy bills over the past 18 months. People are really hurting.
I feel for people who have done the right things: those who are earning reasonable wages but are not rich, who managed to save a 5%, 10% or 15% deposit, and who capped their mortgage at maybe three times their earnings and did not borrow excessively. I do not know anyone in the real world who has a spare £3,000, £4,000 or £5,000 a year to sling at the increase in their mortgage costs after facing all the other inflationary pressures over the past year.
For many, the measures announced will be of limited relief. We know, for example, that lenders will be quite selective about who they allow to take the interest- only option. David Hollingworth, associate director at L&C Mortgages, noted:
“Going interest-only can work but only for the right kind of borrower, someone with a good financial history of repayments, someone with plenty of equity in their home who is just looking for some breathing space.”
That does not cover a lot of our constituents, who may not have a lot of equity at all and may, for one reason or another, have found themselves missing a payment here or there because of other pressures.
The president of the Resolution Foundation highlighted that the approach of consecutive UK Governments to managing the economy and the housing market has led to lower levels of home ownership, with those who own their homes feeling “intense pain” as a result of rising interest rates. He said:
“There is a group of several million people who could be seeing their mortgage costs rise by about £3,000 in a year and that is a lot for a middle-income household to bear. So it is going to be tough for them. Conservatives believe in the property-owning democracy”— although they are doing rather a good impression of trying to destroy it. He went on:
“We’ve seen tragically a narrowing of homeownership over the last decades. That in turn means that if you’re trying to use interest rates, mortgage rates to drive disinflation, you’ve got a smaller group to operate on and they feel more intense pain.”
The Resolution Foundation also noted that more than four in 10 low-income households are spending more than 40% of their income on mortgage repayments. That is extraordinarily stark. When one considers that something in the order of 116,000 households are coming off fixed-term deals every month—perhaps the Chief Secretary to the Treasury can confirm that number—those people who are already spending more than 40% of their income on housing costs will find things extremely tough indeed if they are hit with a 10%, 15%, 20%, 30% or 40% rise in their mortgages this coming year.
The Resolution Foundation also warned that 31% of low-income mortgage holders say that their fixed-rate mortgage will come to an end between now and the end of the year, and that a large number of that group are already spending more than 40% of their income on their mortgage, as I said. It was critical of the fact that the Bank of England does not have a duty to consider the implications that its actions might have on the housing market or mortgage holders. I have asked the Government a number of times recently about reviewing whether an inflation target is the right primary target for the central bank, and whether the tools that the Bank has are appropriate. I wonder whether we should have a growth target, for example.
In New Zealand, considering the impact of rising rates on the housing market is part of the central bank’s remit. The housing market is such a big part of Britain’s economy that I am sure the Bank of England will have considered the impact of rate rises, but it is also clear that its job when setting interest rates is to focus entirely on getting inflation back to 2%, and it has no obligation to look at the impact on the housing market. I wonder whether we should review the targets that the central bank has and the tools it is given.
We know that soaring mortgage costs do not just impact on mortgage holders; the costs of increased mortgage payments are also passed on to renters. In Scotland, we have offered some protection through the rent cap, but such a measure has not been introduced down here. It is interesting that Matt Downie, the chief executive of the homelessness charity Crisis, has said that hundreds of thousands of people could be left unable to cover their rent and at risk of losing their homes:
“Low income renters face a catastrophe—they can’t rely on housing benefit as it’s been frozen since March 2020 and is completely inadequate. There isn’t nearly enough social housing to go round and over a million households are on waiting lists for the few genuinely affordable homes we do have.”
The mortgage crisis and the inflationary crisis have thrown into stark relief the absence of a proper housing policy, particularly from this Tory Government, the size of waiting lists and the costs associated, even now, with getting a rental. Official figures this week showed that private rental costs rose at an annual rate of 5% in April—the sharpest pace on records dating back to January 2016—while rents outside London surged at the fastest rate on records going back to 2006. The Institute for Fiscal Studies also warned that interest rates hitting landlords’ borrowing costs were part of the reason for the very large increases in rents.
The pain is being felt across the board—well, almost across the board—for renters and mortgage holders, on top of all the other inflationary pressures we have seen. The message should be clear to the Government: whether you are a mortgage holder or a renter, holding your nerve will not pay the bills; holding your nerve is not a policy to fix these problems.
I rise to oppose the motion in the name of the official Opposition and to support the Government amendment. The Labour motion is narrowly worded. Yet again, it tries to invoke hysteria and crisis and to undermine those we serve, and it completely misses the facts. We cannot allow the electorate, especially young people, to be indoctrinated by the sort of nonsense contained in the Opposition’s motion, which claims that it is all the Government’s fault.
These are the facts. First, on mortgage rates, the impact of the global financial crisis under Labour back in 2007 meant that the base interest rate fell to its lowest level for 300 years. Starting at 5.7% in July 2007, rates had fallen to 0.5% by March 2009, with a further fall to 0.25% in August 2016. There was a very slight rise back to 0.5% in November 2017, and then in 2021, as covid-19 loosened its hold on us all, globally we were met with persistent inflation caused by a worldwide supply chain crunch and, of course, Putin’s war. Those are the simple truths.
I am going to make progress, because the Minister was very generous in taking interventions, and I want to ensure that everybody gets to speak.
The Bank of England, not the Government, pushed the rate up to 0.25% in December 2021, to 0.5% in February 2022 and then to 0.75% in March 2022—the highest it had been since the summer of 2018. That has continued, and we are now at 5%. I must agree with the Chancellor that there were flaws in the Bank of England’s economic forecasting. As the Governor himself has said, the Bank’s forecasting has not been accurate. It was for the banks to assess the financial competence of those applying for mortgages in the first instance. Banks would have understood that interest rates were artificially low—the lowest in 300 years of history—and that at some point they would naturally go up again, and they did. It took the huge global fiscal shock of a pandemic and a war in Europe to push interest rates up to where they are now, but such interest rates were common under Labour before it crashed the economy in 2008. We should not forget that.
If we look at the rates before the economy crashed and before Labour bled our economy dry and left no money, it keeps the interest rates “crisis” that Labour likes to talk about in perspective—or, to put it more succinctly, as Liam Byrne said in the note he left to his successor in 2010,
“Dear Chief Secretary, I’m afraid there is no money. Kind regards—and good luck!”
That about says it all, and I will never tire of repeating it to remind people what they could be voting for.
Now for more facts. The employment market is strong. I recently visited my local jobcentre in Stourbridge. Those who worked there told me that the local job market is buoyant and that young people in particular are finding jobs. According to the International Monetary Fund, the OECD and the Bank of England, the prospects for the UK economy are bright. Even on mortgages—the subject of this debate—defaults remain at pre-pandemic levels, and the proportion of disposable income spent is almost half what it was in the 1990s. Banks around the world are raising interest rates to fight rising inflation caused primarily by Putin and a global pandemic. This is a global problem. Interest rates are higher in the US, Canada and New Zealand.
I absolutely cannot allow the Labour party’s economic incompetence to go unchallenged. Black hole after black hole after supermassive black hole is unearthed by my colleagues and I, as Labour seeks to twist and turn into whatever position of opportunism it favours in any given week. My right hon. Friend the Chief Secretary to the Treasury has uncovered another casual £3 billion from the shadow Chancellor’s U-turn on the digital services tax. That is in addition to another black hole 10 times the size—£30 billion, simply gone—from Labour’s plans to scrap business rates without replacement. Naturally, I look forward to whatever reply my right hon. Friend receives, but I doubt it will be forthcoming.
Perhaps the Opposition could tell us how Labour’s £90 billion of unfunded spending commitments would lead to lower inflation and interest rates—I await that with interest—or how Labour’s plans for £28 billion of borrowing would lower inflation and interest rates. The Institute for Fiscal Studies certainly does not think it would, and neither do I. We should also be mindful of not dragging language to the extreme. In Labour’s language, everything is a “crisis” these days—cost of living crisis, energy crisis, mortgage crisis. It cheapens the term and undermines all we serve.
I support the Government amendment, although I do not think we needed to use the word “charter”. I think this is just banks doing the right thing for their customers, nudged by a fiscally responsible Government. I will finish as I started, by saying that we cannot allow the electorate, especially young people, to be indoctrinated by the sort of nonsense contained in the Opposition’s motion, which tries to claim that it is all the Government’s fault. It is not. I will be supporting the Government amendment.
Every day I hear from constituents, as many of us do, who are facing hardship as the cost of living crisis spirals out of control. It is truly extraordinary that in Britain today, people across our communities are having to worry about whether they can afford to heat their homes or feed their families, which is a major worry that we will see again as the weather cools down and we come into autumn and winter this year.
We now face another crisis, courtesy of a Conservative Government who seem entirely clueless as to a solution: a mortgage bombshell that leaves homeowners wondering whether they can even keep a roof over their heads. Let us be clear about the scale of the mortgage bombshell. In Halton, there are currently 9,600 households with an average mortgage payment increase of £1,600 a year. I hear from constituents who have lost mortgage deals and simply do not know what to do. Young people trying to buy their first home have been cruelly disappointed; for many, the dream of their first home will not be realised any time soon. That is another way this Government are failing young people. Others tell me that their mortgage costs are rapidly becoming unaffordable.
Worse still are the heartrending stories I hear from constituents who are about to lose their homes altogether. In Halton, the waiting list for social housing is huge, with over 4,000 households on it. Halton Borough Council is doing everything it can to help those in desperate need of a home, but as in so many other parts of the country, its services are stretched to breaking point.
My hon. Friend makes an important point, and she is absolutely right. Places such as my constituency, with some of the highest rates of poverty in the country—which I will come to shortly—are finding it particularly difficult.
There are homeless children from my constituency living in hotels out of the area, who are struggling even to continue to attend their local schools. Recent figures from the End Child Poverty coalition show that 30.9% of children in Halton are living in poverty, but at Widnes food bank donations are now falling below demand. That food bank is purchasing food using monetary reserves. Food inflation has adversely affected the ability of people who had previously donated food to do so—what a disgrace in this modern age. This is at a time when rising numbers of people in my community need to turn to food banks because they cannot afford the essentials that we all need to survive. The situation is becoming unsustainable.
I have been contacted by an increasing number of constituents whose landlords are being forced to sell up as they cannot afford their own mortgages. Nearly 200 households in my constituency are classed as priority homeless, and less than a handful of social housing properties become available each week. There is little point in telling those people to look into private renting, as local housing allowance falls even further behind the spiralling cost of rent. In Halton, local housing allowance for a three-bedroom home is £593 per month, but the current lowest private rents are £750 per month. Local housing allowance for a two-bedroom home is £498 per month, with the current lowest private rents at £650 per month. More and more of my constituents face the nightmare of homelessness, and more and more cannot afford the essentials needed to survive.
What is truly shocking is that this did not have to happen in this way. Last autumn’s mini-Budget, founded on unfunded tax cuts and pushed through without proper scrutiny, was an exercise in economic recklessness that has left hard-working people having to shoulder yet another burden. There is also the impact of inflation, of course, and the fact is that this Prime Minister, when he was Chancellor—I challenged him on this at the time—did not take inflation seriously enough. We know the impact that inflation is having on the cost of interest rates and, therefore, mortgages. The Government have created this catastrophe, and they need to take more urgent steps to address it.
Labour’s five-point plan could help to ease the crisis. I urge the Government to consider the measures that we are putting forward—requirements that would cover the whole mortgage market, unlike the Government’s charter with selected banks. Local housing allowance must be increased if we are to stem the tide of evictions that threatens to completely overwhelm housing services across the country.
This is Government incompetence, plain and simple. It is hurting hard-working people, and it is high time that the Tories stop thinking about how they can grab cheap headlines and instead focus on doing more to really help the many people who are about to lose their homes. The fact remains that this country is worse off under the Tories—people feel worse off themselves. We are seeing failings across public services of a sort I have never seen in my lifetime, and the fact is that this Government need to go now.
It was Margaret Thatcher who said that
“inflation is the biggest destroyer of all—of industry, of jobs, of savings”.
As ever, she was right. That is why the Prime Minister put halving inflation as his top priority at the beginning of this year, along with growing the economy, because if inflation is not squeezed out of the system, everyone will become poorer.
Like central banks across the world, the Bank of England is raising interest rates to combat high inflation, and it is worth noting that rates are actually higher in the United States, Canada and New Zealand. However, the combination of high inflation and interest rates means that people are facing higher mortgage payments, which is causing concern for my constituents. In North West Norfolk, 24% of homes are owned with a mortgage or loan, compared with a national average of 30%—I declare an interest as one of those homeowners—and those families facing higher monthly payments are having to make difficult choices about their household spending, as indeed are people who are renting. That is why the Government are right to have put in place £94 billion-worth of support, a package worth on average £3,500 per household—one of the most comprehensive in Europe.
However, it is equally the case that the Government should not take action that would add to inflationary pressure: for example, by borrowing an extra £28 billion each and every year, as the Opposition are committed to do. The Institute for Fiscal Studies has said that the effect of such action would be to increase inflation and drive interest rates even higher. That is the damaging reality that Labour’s plan would lead to. Instead, along with the cost of living support package—I welcome today’s news that 95% of the disability payments have already been made—we need to take action to ensure that banks and building societies treat people fairly and introduce new protections.
As such, I support the measures in the new mortgage charter. It will help people who are worried about making their monthly mortgage payments by adding an option to switch temporarily to an interest-only mortgage, or to extend the term in order to reduce their monthly payments. The Chancellor gave the example that on a £200,000 mortgage that could lead to a saving of £350 a month, which is material. Importantly, people will be able to switch back to their original term within six months.
People who are approaching the end of a fixed-rate deal will of course be concerned about the rates in the market. Those people will have the opportunity to lock into a rate earlier, and then to change that at any point up to the new deal coming into effect. We have heard about repossessions. Where constituents have fallen behind with mortgage payments, it is incredibly worrying for them to think that they might lose their home. There are already strong protections in place to ensure that that is an absolute last resort, but in the current circumstances it is right to strengthen those protections. Now there will be a minimum period of 12 months from the first missed payment before any such action can be taken—double the period that the Labour party has proposed.
We in this House should be responsible and offer practical support, and the best advice for anyone who is worried about meeting their payments is to talk to their lender. Two weeks ago, I was in my local branch of the Nationwide building society, talking to the team there about the cost of living advice that they are giving to help my constituents. I welcome the fact that Nationwide is one of the lenders that has signed up to the charter. I hope that the rest of the market will also do so and, importantly, will tell customers about the new flexibilities, in order to reduce any concerns they might have.
Curbing inflation is not easy, but it is vital to relieve pressure on family budgets. In his column in The Sunday Times this weekend, the respected commentator David Smith looked at the prospects for inflation and the need for monthly consumer prices index increases to be smaller than a year earlier. He pointed out that from May to December last year, CPI rose by 4.7%, driven by higher energy costs caused by the illegal war in Ukraine. In the year prior to the pandemic, the increase in the same period was just 0.6%. He noted that a rise of just under 2% in CPI from now until December would deliver an inflation rate of 5% by the end of the year. I hope he is right, because getting inflation down must be the priority, and the target remains to halve it by the end of the year. That is what businesses and families want.
Throughout covid, the Government supported people, and in the face of current higher costs, support for the most vulnerable continues. Now, with the additional measures in the charter, people will see their mortgages better protected in the face of higher interest rates. That is the practical action that this Government are taking. The alternative put forward by the Opposition parties—more borrowing and more spending—would simply make inflation higher and everyone poorer.
In advance of today’s debate, I read the contents of yesterday’s statement by the Chancellor on the mortgage charter. The answers he gave went from bad to worse, and beyond. Besides not answering many of the questions put to him, those he did answer—I use the word “answer” loosely—were answered nonchalantly. Then, when he agreed with John Redwood that it was all the fault of a lack of productivity, above all in the public sector—that nurses, doctors, teachers, social workers, border staff, local government staff and the other 5.8 million people who work in the public sector are causing misery and problems for themselves—I realised that the nonchalance was simply a cover for incompetence at best, or ineptitude at slightly better.
I will not, because I do not want to take up too much time at this stage.
Clearly, the Chancellor has lost the plot. What about the productivity of the Government—the most unproductive Government in my lifetime? There was no mention of that in his statement. In that exchange, the issue of supply-side responses was also referenced. If either the Chancellor or the right hon. Member for Wokingham had read page 12 of the Library’s briefing yesterday, that would have confirmed to them that supply-side pressures and bottlenecks are easing and the cost of shipping has come down to pre-pandemic levels, but of course, that is a fact that the Government do not want to listen to.
My initial assessment proved to be correct as the debate wore on. In response to a question from my hon. Friend Bill Esterson about the reasons why many people in Europe are paying significantly less in mortgage payments than in this country, the Chancellor defaulted to the answer he gave to the previous question from my hon. Friend Mr Perkins. He went from turgid to orotund and then back to turgid, with a little bit of circumvention in the middle. I thought I was listening to the Radio 4 programme “Just a Minute”, but without the humour.
The fact is that having a roundtable with the banks is all very well and good—a bit of finger wagging, a wink and a nod here, knowing looks there—but while the Chancellor looks for a solution or tells the banks in no uncertain terms that it is an issue that needs to be resolved, he is doing little to ease the pressure on millions of our constituents who have a mortgage, and there are millions of them. He said it needs a solution, and of course it does—I think we can all agree, without any contradiction, with that pearl of wisdom from the Chancellor. My cat Gilly knows there needs to be a solution. The only problem is that the Chancellor did not present us with one—unless, of course, that part of his statement was left out of Hansard.
I will not go into too much detail about how the current mortgage crisis sits alongside the cost of living crisis, the mental health crisis, the health crisis, the housing crisis and the many other crises inflicted on the country by the Conservative party—they have been covered on other occasions, including yesterday and today—but there are many thousands in my constituency, and millions across the country, who will be paying thousands of pounds more in mortgage payments as those fixed-term deals come to an end. What about the thousands of mortgage prisoners, many in my constituency, who have been hit even harder without Government intervention?
I want to bring to the attention of the Minister, and vicariously to the attention of the Chancellor, an article in the Financial Times today by Helen Thomas—I hope she will forgive me if she feels I am cherry-picking from the article, which I am not. She makes excellent points, and these are issues that have to be addressed by the Chancellor sooner rather than later. She says:
“This crisis should prompt longer-term questions about the peculiarities of the UK market”— meaning the mortgage market—and that
“with little lending at above five years fixed and essentially none above 10 years, the UK looks an outlier even in Europe”.
In her final paragraph, Ms Thomas says:
“This interest rate shock will prove uncomfortable for many. But it should also prompt fresh debate on what might create a less dysfunctional mortgage market in the future.”
The question for the Chancellor is whether he is up to the challenge in effect laid out in that analysis. Were any of those points raised in his roundtable with the banks on Friday, and what commitments did he get from the banks in relation to easing the pressures on my constituents? Crises are years in the making, and the longer this Government stay in power, the longer this crisis will continue, so it is time for the Tories to go.
During the French revolution, the Queen of France supposedly said, “Let them eat cake”, after being told that her subjects were starving with no bread. Today, as the country faces a mortgage meltdown, our multimillionaire PM tells people that
“we’ve got to hold our nerve, stick to the plan and we will get through this.”
I am not sure whether he is looking to model himself as a modern-day Marie-Antoinette, but whether or not that was his intention, his gall is quite beyond belief. I will leave it to others to say that the Prime Minister is guilty of projecting
“an extraordinary, Orwellian, meaningless, evasive word salad” when he speaks. Nor will I say that the PM is
“as much of a mendacious, narcissistic sociopath as his previous boss”.
These things are much better delivered by Ben Elton himself.
However, I will say that we are past crisis point. The Bank of England has raised the base rate 10 times since December 2021, from 0.1% to 4% as of February. Meanwhile, figures from the Office for National Statistics show that average weekly earnings have fallen in real terms in the year to December 2022 by 3.1%, which is one of the largest falls in growth since comparable records began in 2001.
Scottish homeowners are suffering for Westminster’s failure. As a result, independence becomes ever more necessary for ordinary Scots, so that they can stop paying the price for UK Government self-inflicted messes. Stronger direct action is needed to protect vulnerable homeowners from soaring mortgage costs. Like my right hon. Friend Stewart Hosie, I welcome the limited action that has been taken so far, but a purely voluntary scheme that stops repossessions for 12 months and allows for lower payments for six months is not enough to protect many householders from this disaster.
My constituency of Midlothian is especially vulnerable to this Westminster-triggered chaos. Midlothian’s population is growing, placing increasing demands on services that aim to tackle poverty. Just under a quarter of Midlothian’s children—4,400—were living in poverty going into the pandemic and the cost of living crisis. Midlothian has higher rates of economic activity and lower rates of unemployment than the Scottish and UK averages, but we also have lower average wages across some groups, in common with many other former coalfield communities. The falling value of real wages will hit many residents hard, and the higher than average house prices in Midlothian suggest a vulnerability to economic downturn and other cost of living pressures, particularly mortgage hikes. The average price of a house in Midlothian in October 2022 was £243,500, compared with the Scottish average of £193,730. This combination of higher house prices and lower wages could spell disaster for many.
The Chancellor’s mortgage charter is really a sticking plaster on a broken arm, and my constituents deserve better. These residents have been forced to stretch their budgets to get on the housing ladder in the first place, and are now utterly vulnerable to rising costs and labour market turbulence. It is hard to believe that the Tory party was ever seen as a bastion of high finance and fiscal propriety. Del Boy and Rodney could do a better job. In Scotland, we are fortunate that we have an alternative way out of this mess, and now more than ever we need to make sure we cast this PM and his ultra-rich cronies into the dustbin of history by forging ahead with independence.
The Tory mortgage bombshell is the latest Tory-created crisis to hit hard-working families, adding to the litany of errors over the last 13 years made by an economically arrogant, incompetent and ignorant Tory party. According to the financial data provider Moneyfacts, the average two-year fixed residential mortgage rate has risen to 6.23%, up from 6.19% just last Friday. This is the highest since last November, when the property market was thrown into utter chaos after the Tory mini-Budget, otherwise known as the Budget that broke Britain. Because of the mess they have created, banks are now withdrawing mortgage deals, and the average household is facing a hike of almost £240 a month more on their mortgages.
In my constituency, this latest hike in interest rates will impact nearly 7,500 households, with an average increase in payments of £1,300 a year. As Opposition Members have stated already, these increases come at a time when families are already living hand to mouth. The sad reality is that Conservative Members just simply do not get it. Mortgage payments are up—by £1,300, if not more—while energy prices are up by thousands of pounds per household, supermarket food prices are up by 15% this year, council tax is up by 5% and car insurance is up on average by 43%. Again, they just do not get it.
The Prime Minister probably does not understand much, but who can blame him when he is sitting in his private plane, wearing his £3,000 suit and sipping coffee out of his £180 mug, with his head stuck in the clouds. Meanwhile, back down here on earth, in places in the real world such as Bradford West, hard-working families are being forced to skimp on daily necessities such as three meals a day and are on the brink of collapse. The UK economy’s ever-worsening crisis is not a recent misfortune. It is the consequence of a total abdication of economic prudence by the Tories over the last 13 years. The poor state of the UK economy today cannot be solely pinned on a global crisis. We need to call it out loud and clear that our ailing economy has been orchestrated by a string of Tory self-inflicted policy errors.
Every country faced economic impacts due to the pandemic, but our economy bounced back at the slowest rate of any G7 nation, with our GDP at the beginning of 2023 0.5% lower than at the end of 2019. Every country faced the economic impact of the global financial crisis, but reckless Tory austerity since 2010 has resulted in more than £0.5 trillion of lost public spending and a weaker economy. All the G7 nations faced the effect of rising energy prices caused by the war in Ukraine, but the UK’s over-reliance on energy, coupled with the Tories depleting our ability to generate our own energy, has left us the most poorly equipped to deal with rising energy prices.
The Tories’ disastrous 13 years in charge will be remembered for crashing the economy, poor growth, sky-high inflation, worsening living standards and the disastrous management of Brexit. Each of those alone has battered hard-working families, who have been plunged into poverty, but the combined litany of self-inflicted, delinquent and scandalous errors has left the UK a whole lot worse than in 2010.
We must hold the Conservatives to account, and the worst thing is they were warned. Martin Lewis, the finance expert, has said he warned the Government about mortgage market issues last year. He said about the current mortgage shock:
“Yet now the time bomb has exploded and we're scrambling about what to do.”
That is what the Tories do: they sleep at the wheel, then try to deal with the wreckage after the crash, and then blame everyone else.
On action on mortgages, it was Labour’s announcement that forced the Government to take urgent steps. However, Labour has called for mandatory measures to be placed on banks so that no one is left without support; the Government measures are completely voluntary and do not cover all of the mortgage market, with some 15% of the market for main residences missing out and no buy-to-let coverage.
The rise in interest rates last week to a 15-year high will be profoundly worrying for many of my constituents, particularly the many homeowners with a mortgage, but also those privately renting who are worried that their landlord might now put up their rents at a time when it is very difficult to find a genuinely affordable home to rent in my constituency. It is estimated that there are 8,900 households in my constituency facing an average increase in their annual mortgage payments of £5,400. In the neighbouring Conservative-held seats of Harrow East some 7,800 households face an estimated annual mortgage payment increase of £6,200 and in Ruislip, Northwood and Pinner 9,500 households face an average annual increase in mortgage payments of some £7,000.
Harrow has one of the highest rates of home ownership and owner occupation in London. Families move out to Harrow because family homes have traditionally been more affordable than in inner London, and we have excellent schools and very good transport links. The Tory party’s mortgage bombshell threatens the dreams of too many Harrow families—dreams of owning and investing in their own homes, of being able to always afford the rent for the home they live in, of being able to provide a stable and secure place to bring up their children and to look after older family members and still to be able to afford a good quality of life with good holidays and trips out. Those ambitions are much tougher now for even more families in my constituency because of the Conservative mortgage bombshell. In short, close to 18,000 households in the London Borough of Harrow face an average increase in mortgage payments of between £450 and £580 a month.
Those figures are devastating for family finances. Ever more mortgage deals have been withdrawn by the banks. Moneyfacts data suggests that the typical rate on a two-year fixed rate loan have increased to almost 6%, double the rate of a year ago, and the independent Resolution Foundation estimates that by 2026 some 6.5 million households across the country will have been affected by the post mini-Budget rise in mortgage rates. It is not just homeowners who are going to be hardest hit: charities and property experts are understandably warning that the rapid rise in borrowing costs is not just having an impact on owner-occupiers but is contributing to record rent increases.
I am fortunate in Harrow to have a community that is determined to do what it can to help those in real need. Harrow food bank, London’s community kitchen, My Yard Harrow and Soul Kitchen Harrow provide an impressive and dedicated offer to families in dire need. They should not have to do that, but energy bills and food prices are already high, and if mortgage costs continue to feed through into rent increases, the pressure on lower-income families will be even more profound and disturbing.
Conservative Members like to claim that what is happening here is part of a global crisis or is just down to the Bank of England’s incompetence. There are of course global factors in play and it is also true that the Bank of England has questions to answer, but the disastrous mini-Budget last year and 13 years of economic failure have left our economy far weaker than it should have been, and the mortgage crisis is clearly worse in the UK than in other European countries. As my right hon. Friend the shadow Chancellor of the Exchequer said, mortgage rates in Germany, France, Ireland and the Netherlands are typically lower than here.
I strongly support the plans set out by my right hon. Friend. She has forced the Chancellor to take some action, but it does not go far enough to help those renting and those facing fast-rising mortgage costs. Mandatory action is required to support mortgage holders. It should not be up to the banks and those offering mortgages to decide whether they want to do the right thing; they should be forced to comply and to help, and we must certainly end no-fault evictions straight away.
The British people deserve better than they are getting from the Conservative party. Homeowners in Harrow should not be suffering the ever-increasing burden of higher mortgage costs. Ministers could do more to help. They should not be leaving 1 million people unprotected; they should back Labour’s plan today and then they should call a general election.
Ever since I was first elected in 2015 I have seen the pressures of the cost of living increase in my constituency. I meet regularly with the manager of our local food bank, and every time she tells me that the number of parcels it is delivering has reached a new record, that the challenges that result in people needing emergency help are becoming more complex and intractable, and that some Government policy decisions have directly contributed to a step-change in the level of need.
We have long seen spiralling private rents, unacceptably low pay and punitive changes in the benefits system creating terrible pressure on household finances, but the past nine months have seen a further increase in cost of living pressures, which are causing even previously comfortable household finances to buckle and break. People have seen their energy bills rocketing, the cost of essential food creeping up week by week, and unfeasibly high childcare costs. Now, thanks to a Prime Minister and Chancellor who have delivered more damage per day in their short tenure than any of their predecessors ever did, many of those same people are now staring down the barrel of imminent unaffordable mortgage increases.
In my constituency, 9,400 households will face a mortgage cliff edge this year, and they are expected to face an average payment increase of £6,300 a year as they negotiate new mortgage deals. This is a cause of profound distress and anxiety. Some of my constituents are worried that they stand to lose all that they have worked for—the material security that underpins their family life.
What is the Prime Minister’s response to this calamity and the profound distress it is causing? “Hold your nerve”, he says. That might be appropriate advice for one of his investor pals looking at some spreadsheets that are having a rocky ride, but it is a totally tone-deaf response to my constituents who are looking at their bank accounts and finding that the amount of money coming in simply will not cover all the bills they are required to pay. A voluntary agreement that covers some, but not all mortgage providers and offers only short-term measures is also of little comfort to my constituents and mortgage holders across the country, who will be left anxiously waiting to find out whether their provider is one of those offering support and worrying about what they will do when the mitigation measures come to an end and the cliff edge is still there.
The Government’s measures, cobbled together under pressure, simply do not touch the sides of the problem. They are voluntary for the banks and do not cover all mortgage providers. While the focus of the Government’s piecemeal plans is homeowners, there is nothing at all to protect private renters. I am seeing a huge increase in the number of my constituents who are facing section 21 eviction notices—a practice that the Government promised to outlaw years ago—linked to increasing rents. Some of that is due to the increased mortgage costs faced by buy-to-let landlords, who are excluded from the Government’s measures and are passing their own increased costs directly on to their tenants, but some of it is simply unscrupulous landlords taking advantage of the current economic climate to hike up rents once again.
I speak with private renters in my constituency every week. They are beside themselves with worry due to the insecurity of their tenure and the risk they live with that at any moment they could face a devastatingly unaffordable increase in their rent. The legislation that private renters urgently need has been yet another casualty of the chaos and uninterest of this Government and their contempt for the public they are elected to serve. It is not for the want of time—this House has regularly been concluding its proceedings early in the day in recent weeks—but due to the lack of political will to drive forward urgently needed legislation, and that is shameful.
Labour has set out a comprehensive plan to ease the Tory mortgage penalty that would provide meaningful help to homeowners, whatever their mortgage provider, and protections for private renters. Without such a robust package of support, communities across the country face a catastrophic increase in housing insecurity and homelessness, destabilising families, affecting mental health and wellbeing, making it harder to hold down employment and causing deep hardship. My constituents urgently need more leadership, more urgency and more meaningful action from their Government. If this Conservative Government are too weak, out of touch and preoccupied to act—and they certainly are—it is time they stepped aside for a Labour Government who will be committed to delivering the change our country so desperately needs.
I will start by saying how serious this mortgage crisis is for many of our families. If we reflect on how the Government Benches are empty compared with the Opposition Benches, it demonstrates the seriousness with which the Government take this issue. No wonder the Prime Minister said, “Hold your nerve.” The contributions from Government Members on this issue, which affects millions of people, again demonstrate their lack of empathy and the lack of seriousness with which they take this important situation.
We are in this mortgage crisis because of the mini-Budget. Imagine for a moment if that had not been a mini-Budget, but a full Budget—what other crises would we now face after 13 years under Tory Government, when they have broken this country for millions of our residents and constituents? Overnight, damage was inflicted, with increased payments for millions of mortgage holders. Mortgages were withdrawn overnight and house sales were cancelled. Mortgage rates went up and payments went up for millions of our constituents. In my constituency, 7,700 households are affected by that decision, with an average increase of £2,700 a year. Many of those households are run by key workers—the very workers we were clapping. Today, we are slapping them in the face by saying, “We will not help you with a decent wage increase. We will not help you with mortgage increases. We will not help you with the cost of living crisis.” That is the reality we are facing.
People should not be fooled by the words of Government Members when they say this is a global crisis. Look at their 13 years in office. Where are we with mortgage rates now? Under the previous Tory Government, where were we with mortgage rates then? They were at 15%, and we had record repossessions. This is a repeating of history and of what the Tories are good at: making sure that the poor get poorer and the rich get richer. That is what they stand for. I challenge Government Members to tell me—I see one shaking their head—how many of their constituents and households are affected by this mortgage increase and what the average increase is. I will give way to Anthony Mangnall if he knows the answer.
My heart bleeds for those people. The Government have denied millions of workers in this country a decent pay increase, which would have allowed them to deal with the cost of living crisis. But no, what does the Prime Minister of this country say? He asks the public to hold their nerve. This is not about nerve; it is about the basic fact that life has become unaffordable for millions of people as a direct result of the Government’s failed approach. Instead, the responsibility falls on ordinary hard-working people. Meanwhile, the Government continue to sit back and watch the chaos unfold.
What about the renters? Yesterday, the Chancellor failed to mention renters in his speech at all, showing the Government’s complete disregard for this mounting issue. Renters face an unsustainable increase in rents as landlords deal with mortgage costs. Renters cannot continue like this. The Government are not in a position to help ordinary hard-working families. They should give way and call a general election.
It is an absolute pleasure to follow my hon. Friend Tahir Ali, who made an outstanding speech.
We are living in through a Tory economic crisis made in Downing Street and paid for by the British people—Members on the Treasury Bench would do well to listen. After 13 years of this Government, this country is left with the biggest fall in living standards since records began. We have weak growth, low pay and the highest inflation in the G7, and Brexit is continuing to cause harm to our economy through reduced productivity, trade and investment. If that was not enough, people are now being hit by the Tory mortgage bombshell, which is having a devastating impact on households across the country.
Many people have told me that they are at breaking point, especially as this bombshell comes after the pandemic and the cost of living and energy crises. The Prime Minister’s patronising advice at the weekend that people should just hold their nerve shows how out of touch he is with the mortgage struggles of people across the country, including my constituents. Battersea is one of the 25 worst-affected constituencies in the country, with 9,300 households facing an annual mortgage payment increase of £8,400. Average house prices in Battersea are already 15 times the average salary, and the increase in mortgage costs will put owning a home even further out of reach for many.
Under the Tories’ watch, housing affordability has got worse and worse, with the ratio of house prices to earnings reaching record levels in England. It is not just homeowners who are suffering; almost 2 million private renters will be hit by rent increases as landlords pass on those higher costs to them. That is even more worrying for low-income renters, who cannot rely on housing benefit to help meet that wage shortfall. As we already know, local housing allowance is not sufficient and currently does not cover much of the rent. We can wonder why the Government are not doing more to lift up LHA payments.
The Government are not offering any support for renters. The Chancellor failed to mention them once in his statement yesterday, and the Chief Secretary to the Treasury also failed to mention renters in his speech.
Well, he did not mention a renters charter and ending no-fault evictions—that is what he should have talked about.
The Government need to follow Labour’s lead by bringing in a renters charter to end no-fault evictions and introduce four-month notice periods for landlords. Why would they not? They will try to blame global factors for their mortgage crisis, but the cost of borrowing is higher here than in any other developed economy. Homeowners are paying thousands of pounds more than Europeans for new mortgages, as interest rates soar. Research shows that even before the latest hike, a new mortgage cost a typical household over £2,000 more a year than in France.
There is no question about who is to blame: the Tories. Why? Their disastrous kamikaze Budget last autumn crashed the economy, the pound and our global reputation, and continues to haunt millions of homeowners, who are shelling out extra on their mortgage payments. The Government have failed to act quickly and decisively against the mortgage cost rises. The Prime Minister was warned that they should take action, but they were missing in action and failing to do anything. Labour has a five-point plan, but the Government have only managed to come up with sticking-plaster solutions in the form of a voluntary agreement, when Labour suggested a mandatory one. The Chancellor’s plans do not go far enough. The Government could have applied much more pressure on the banks. Why will the Prime Minister and the Chancellor not apologise for their Government’s failure to control inflation, which led to the Tory mortgage penalty?
This country is buckling after 13 years of this Tory Government. Labour will bring back credibility and financial security to our economy and to households, to ensure that the people of this country can have better. We are done with 13 years of this Tory Government. We need a general election now.
The Tory mortgage bombshell can trace its roots back to the disastrous mini-Budget and the so-called growth plan last September. Coupled with 13 long years of Tory failures, it left our country in a mess and thousands of families in an extremely vulnerable and precarious position. Last September, a mortgage adviser in Merthyr Tydfil contacted me and told me the effect of the mini-Budget and how devastated he and many of his customers were to see hundreds of pounds added to mortgage payments every month. The shadow Chancellor was right that we can never allow the Tories to forget that.
After 13 disastrous years and an even more disastrous few months, the UK has the highest inflation in the G7 and a mortgage crisis that is worse than in other countries—typically, mortgages are £100 higher than in other European countries. In Merthyr Tydfil and Rhymney, approximately 6,400 households are affected by the Tory mortgage bombshell, paying on average an additional £1,300 per annum, on top of the cost of living crisis, all caused by the economic failures of the Conservative party.
Recently, I raised in the Chamber the plight of our local food banks, which are struggling to cope under so much pressure from demand and reduced donations, as people across our communities are feeling the pinch and are less able to donate. The Tory mortgage bombshell will only make matters much worse. Indeed, the added stress placed on families with their homes under threat is just unforgiveable.
Citizens Advice is an agency that works hard to support the most vulnerable. I work closely with our local citizens advice bureaux on promoting events to maximise income. They have been telling me for some time how their workload has increased massively, particularly on debt advice. We learned from Citizens Advice this week that its clients with mortgages have seen their finances fall off a cliff, as the shadow Chancellor said. Every month, the amount they need to spend on things such as housing, bills and food is over £100 more than their income. The situation is not sustainable and causes anxiety, stress and deep worry for so many of my constituents and many thousands more across the country.
The previous Prime Minister has apologised for her mistakes, which led to a spike in interest rates following the disastrous mini-Budget last Autumn. However, the Minister should do the same. This whole rotten Government should hang their head in collective shame for the misery they are causing so many.
The Tory mortgage charter falls short in a number of key areas. Not all the mortgage market is covered by the charter. There remains a huge worry that more than l million households could miss out on support. The Government must outline the measures they intend to take to ensure that help will be available to everyone struggling to pay their mortgage. Perhaps the Minister can address that in his wind-up, and confirm that support will be available to all, not just to those who happen to have a mortgage with one of the banks on the Chancellor’s invite list for his cosy chats.
All too often, this Tory Government have been too slow to act. Renters are not even mentioned in the latest charter. In his statement on Friday, why did the Chancellor make no mention of the impact of this crisis on people who are renting? It is time for the Minister to outline whether he agrees that one way to provide support for renters is to back Labour’s proposal to halt no-fault evictions.
The Conservative party likes to think of itself as the party of home ownership, but with housing affordability lower than ever in recent years, that claim lies in tatters. There is very little or no assurance given to those looking to take their first step on to the housing ladder that they will not be held back by issues in the mortgage market caused by the Tory mortgage bombshell. The Government simply cannot brush things away and put the cost of living crisis down to global factors. The latest data on mortgage rates specifically shows that they have increased faster here in the UK than in the USA since the mini-Budget and, as we have heard, the gap in mortgage interest rates with our nearest neighbours means someone with a £200,000 mortgage will pay over £1,000 a year more in the UK. The reality is that the Government have no explanation for that, apart from that they have been grossly incompetent.
It is time for the Government to step aside, put an end to the misery faced by millions of families, call a general election, let Labour get on with governing and get this great country back on its feet.
Many households who are already contending with the cost of living crisis are now set to face a further squeeze on their budgets thanks to the Conservatives’ mismanagement of the economy.
It is shameful to see so few Members on the Conservative Benches. Suzanne Webb, who is no longer in her place, said the Labour party was scaremongering. I wonder if that is what she will tell the 9,000 families in her constituency who are facing a £2,400 a year increase in their mortgages. Perhaps she just does not understand the impact of the financial disasters created by those on the Conservative Benches. Some 7,500 families in Blackburn are set to see their mortgages rise by £1,300 this year. The Resolution Foundation estimates that 6.5 million households will be affected by the post-mini-Budget rises in mortgage rates by 2026 and does not expect two-year fixed-rate mortgages to fall below 4.5% until 2027. That is a long time to hold your nerve.
The UK currently has the highest inflation in the G7. As with the energy crisis, the mortgage crisis is worse in the UK than in neighbouring advanced economies. And there is another crisis looming. Economists warn that there is a real risk of job losses and a sharp recession, as the latest economic forecasts project just 0.2% growth this year. We must not forget how we got here. The Conservative’s disastrous mini-Budget and 13 years of failure have left us dangerously exposed on inflation. During Prime Minister’s questions last Wednesday, the Prime Minister insisted that the best way to cut costs for homeowners would be to reduce inflation. On assuming office last year, his core commitment was to cut inflation to 5% by the end of this year. Of course, we all remember the Ready for Rishi campaign last July. He promised to reduce inflation. Conservatives did not believe him then and we do not believe him now. With inflation falling by only about 1.3% to 8.7% over the last six months, it looks increasingly unlikely that the Prime Minister will achieve that and fulfil his promise. The Government’s measures do not go far enough and leave too many people exposed.
In his statement to the House yesterday, the Chancellor stated that the charter has been signed by lenders covering 85% of the mortgage market—let us just forget the other 15%. Given that the charter does not cover the whole mortgage market, more than 1 million households could miss out on support. The Minister must guarantee that the measures he outlined will be available to everyone struggling to pay their mortgage, not just those who happen to have a mortgage with certain lenders and not just those who are up to date on their payments, because for months people have been falling behind, jumping from crisis to crisis under this Government. The Government are offering insufficient support to millions of renters. The Chancellor did not even mention them in his statement to the House yesterday. Has he made an assessment of the impact on local housing allowances? Has he made an assessment of the impact on the DWP? Or do the Government just accept that landlords will pass increased costs to tenants? An already broken rental market will suffer more without intervention.
Families are finding themselves on a cliff edge after months of increased bills and a cost of living crisis. It saddens me to see such a situation after more than a decade of austerity. Given what we have in our pockets and how we are able to pay our bills, it seems to us that, across the board, we are far worse off than we were back in 2010. No matter how many times the Prime Minister says, “Hold your nerve”, that will not pay the bills. How do you hold your nerve when you are struggling to feed your kids? How do you hold your nerve when you risk losing your home? I think the people of this country have held their nerve for long enough, and I think it is time for a general election.
Order. There are three more speakers before the winding-up speeches, which I expect to start at about five past four, and I expect two Divisions after that. I ask any Members who have taken part in the debate and are not present to make their way to the Chamber now.
In my constituency, 9,500 people will now be forced to pay £2,400 more a year, and that sits firmly at the Government’s door. Across Britain, people are being hit hard by the Tory mortgage bombshell, and the banks are now withdrawing mortgage deals. After 13 years of Conservative Government, does it not just say it all that millions of people face that Tory mortgage bombshell and the threat of losing their homes? Unlike this Conservative Government, however, Labour will not stand by as millions face a mortgage catastrophe made in Downing Street. I commend our five-point plan, which will ease the effect of the Tory mortgage bombshell, and urge Ministers to get behind it.
We will allow borrowers to switch to interest-only mortgage payments for a temporary period. We will allow borrowers to lengthen the term of their mortgage period. We will require lenders to reverse any support measures when the borrower requests that. We will require lenders to wait for a minimum of six months before initiating repossession proceedings. We will instruct the Financial Conduct Authority to issue, as a matter of urgency, consumer guidance stating that the credit score of borrowers making temporary switches to interest-only mortgage payments and lengthening the term of their mortgage period should not be affected. I am particularly pleased to note that Labour would introduce a renters charter ending “no-fault” evictions with four-month notice periods for landlords. That is how we will give working people the certainty and support that they desperately need.
After the 2010 election and the global financial crash of 2008, we heard many times that the financial situation was down to the Government of the day. Conservative Members crowed from the treetops. Today, they say that everything is due to the macroeconomic climate and global economic challenges. I say to them, “You cannot have it both ways”, because as things stand, they are in office but not in power. I was elected to this place in April 2019, and the last four years have not been the easiest for our country. We need calm and sober leadership, we need decency and respect in our politics, and we need a real plan to protect jobs, homes and livelihoods for people in Newport West and across the country.
Last week, my constituent Jolene came to my surgery to talk to me about her fears for the future: fears about how she will pay her bills, how she will pay her mortgage, and how she will save her home. Jolene is now a full-time carer for her children, who have additional needs, but her husband is a full-time HGV driver who is working as hard as he can. The cost of living has hit them hard, and in the last few months their mortgage payments have risen from £520 to £750 a month; Jolene believes that they will go up again. Like thousands of other people across the country, she is sliding further and further into arrears, and is desperately concerned about how she will be able to look after her children, both now and in the future, and hold on to her home. What is the Minister’s message to Jolene? This morning I met another constituent whose monthly mortgage payment has rocketed from £400 to £1,100. Who can possibly budget enough to cope with such shocking increases?
I am sorry to say to the Minister that nothing we have heard from the Government in recent days gives me any confidence that they have a plan to do right by our people. Some 9,500 people in Newport West will now be forced to find money to protect their homes in the middle of a cost of living crisis. That sits at the door of the Conservative party and its ill-fated autumn mini-Budget, which did nothing but spook the markets and let down those most in need of a Government who were on their side.
Only Labour has a plan to build a stronger economy that will see us less exposed to inflation over the long term, to give our people the support they need and to finally restore economic credibility after 13 years of failed Conservative Government. The people of Newport West deserve that—and so do people in all corners of our United Kingdom.
I would like to speak in favour of the motion. Time is pressing, so I will touch briefly on the scale of the problem facing the UK.
It is fair to say that many families—indeed, up to 7.5 million—face a very difficult challenge at present because of the increase in interest rates and the effect on mortgages. As we have heard, it has been calculated that that increase means around £2,400 extra on household mortgages every year, which is £1,000 more than the increase in mortgages in the United States.
The situation affects both buyers and renters, because landlords put up rents as well, but the Government are proposing only a voluntary scheme, which obviously falls well short, and about 1 million families are likely to be missed by this inadequate measure. Earlier, the Shadow Chancellor set out a much more effective scheme, which I obviously commend to the House.
Given the lack of time, I will move on swiftly and speak about how the Government’s mortgage bombshell is affecting local residents in Reading and Woodley. This crisis is making what is already a difficult housing situation far worse for local people in our part of Berkshire. We have had high house prices and rents for some years, given the shortage of supply and many other related housing matters.
To give colleagues a taste of the situation locally, terraced houses in Reading town centre can sell for as much as £300,000, so these are quite expensive properties. There is also a real shortage of property and a large waiting list for local authority properties. For a family house, the price may be as much as £600,000 or £800,000, so we are already talking very large amounts of money. As I said, renters face additional problems. We have an issue with dangerous cladding not being removed in some cases, as well as issues with leaseholders and landlords. There are, therefore, serious problems in our area, and that is on top of the national problems facing families, which I mentioned earlier. Colleagues from across the House have also mentioned the 20% rate of food inflation and the UK inflation rate being the worst in the G7.
I would like to point out some of the problems facing individual constituents. Without giving away too many personal details, perhaps I could just give a flavour of the problems involved, and I hope the Chief Secretary will reflect on them. One constituent—a gentleman called Peter—is in a good job. He has a young family, with two children, and they live in a three-bedroom house. They face an increase of £800 a month in their mortgage, and they simply do not know how they will cope.
Another constituent, Donna, who lives in a flat in Reading town centre, faces a £400-a-month increase. Again, that is an absolutely incredible increase in what she has to pay for her home. Sadly, she is one of many residents locally who have been affected by the cladding scandal and by delays in removing various types of dangerous cladding. She is already under enormous pressure because of the emotional stresses and strains of having a flat with cladding problems. In addition, she now faces this enormous extra increase in her payments. She is self-employed and has a small business. Imagine how this feels to her. This truly is a dreadful crisis.
I realise that time is limited, and I hope my hon. Friend Alex Cunningham can get in shortly, but I ask the Chief Secretary to report back to the Chancellor just how dire the situation is and how it is affecting people up and down the country—both my residents and those of colleagues from across the House. I also urge him to think about the five-point plan outlined by the shadow Chancellor, which has been well researched and well received across the industry.
I well remember 1979, when mortgage interest rates soared under Thatcher’s Tory Government as the Bank of England base rate hit 17%. Those who were buying homes at the time knew all about it. My wife Evaline and I, both in relatively well-paid professional jobs, had moved home a couple of years before and, like many others, had maximised our mortgage to secure the house we wanted for our growing family. Little did we know that the cost of our mortgage would almost double in a couple of years.
My elder son John says he remembers Evaline and I regularly sitting at the table to go through our finances, often robbing Peter to pay Paul, while realising that Peter would still have to be paid with plenty of interest on top. Yes, the anxiety goes well beyond mortgage holders; it affects the whole family. Like many homeowners today, we contemplated selling up and moving to a smaller home, but the reality was that we would not only have lost our new home; we would not have been any better off.
I have huge sympathy for people today who are seeing their mortgage costs go through the roof, largely because the Tories crashed our economy by making some extremely daft decisions when our economy was still trying to cope with the double whammy of Russia’s illegal war against Ukraine and our exit from the European Union. We had it tough when our costs doubled, but today’s Tory mortgage bombshell is so much worse.
Moneyfacts data suggests that the typical rate of a two-year fixed-rate mortgage has increased to almost 6%, almost double the rate of a year ago, and the Resolution Foundation estimates that 6.5 million households will be affected by the post-mini-Budget rise in mortgage rates by 2026. Other huge consequences emanate from the Government’s decisions. This week, economists warned that there is a real risk of job losses and potential recession. The latest forecast for economic growth suggests that the UK is struggling to get out of the slow lane, with growth of just 0.2% forecast for the year.
On Sunday, I watched the Prime Minister ducking and diving under quite simple questioning from the BBC’s Laura Kuenssberg, and it sickened me that he had the nerve and the gall to tell mortgage holders to hold their nerve. He lives just down the road from me, and I wonder if he would like to sit down with a few of my constituents whose fixed-rate deals are coming to an end within the next few weeks. One of them faces an increase from just short of £800 a month to £2,600 a month. I would like the Prime Minister to outline how that constituent should hold their nerve and retain their home.
That same constituent, like everyone else, is not only seeing their mortgage go through the roof. They must also cope with a near 20% increase in food prices, which according to the Office for National Statistics is the greatest hike in 45 years. That can be added to the extra burden of council tax increases across the country, as local authorities collect the Government’s social care levy because the Tories have so drastically underfunded social care in recent years.
What are the numbers on Teesside? In Stockton North, 8,900 families face an increase of £1,400 this year. The pain is the same across the Tees valley, with 11,900 families in Stockton South paying £1,800 more, 9,000 families in Darlington paying £1,400 more, 7,200 families in Middlesbrough paying £1,200 more, 9,300 families in Middlesbrough South and East Cleveland paying £1,700 more, and 8,000 families in Redcar paying £1,500 more.
The Tory mortgage crisis has other wide-ranging impacts. The Government’s failure to build sufficient homes over the last decade has led to limited supply and forced prices up, making it more difficult for people to get on the housing ladder. We also see developers putting some projects on hold and scaling others back. The Government’s housing figures, published today, show that affordable housing providers have stalled or stopped schemes, as they are experiencing what they say is a “perfect storm” of build cost inflation, rising labour costs, material unavailability, building remediation issues and a duty to support tenants through the cost of living crisis. Developers cutting the number of homes they are building will have an inevitable impact on jobs not only in the building sector but across the supply chains that support it.
We could go on forever about the excess profits being made by the banks, as they cash in on higher interest rates, but that appears to be fine by the Government. Now that times are good again for the banks, they need to do so much more. They should concentrate on helping their customers instead of their share price and their bottom line. I wish I could be confident that they will all act, but I am not. It is down to the Government to take action to compel them to do so.
I thank everyone who has contributed to this afternoon’s debate. I cannot help noticing that the vast majority of them are Opposition Members, so I thank my hon. Friends the Members for Halton (Derek Twigg), for Bootle (Peter Dowd), for Bradford West (Naz Shah), for Harrow West (Gareth Thomas), for Dulwich and West Norwood (Helen Hayes), for Birmingham, Hall Green (Tahir Ali), for Battersea (Marsha De Cordova), for Merthyr Tydfil and Rhymney (Gerald Jones), for Blackburn (Kate Hollern), for Newport West (Ruth Jones), for Reading East (Matt Rodda) and for Stockton North (Alex Cunningham).
We did hear a couple of speeches from Conservative Members. I thank Suzanne Webb for her speech, but she forgot something. She forgot to tell us that 9,000 households in Stourbridge are going to be facing an increase of £2,400 a year in their mortgage payments. She was followed by James Wild, and he forgot something too. He forgot to tell us that 8,000 households in his constituency are facing an increase in mortgage payments of £2,800 a year because of the Tory mortgage bombshell. Just in case it slips the Minister’s mind when he stands up to make his own speech, he should tell us that 10,500 households in Arundel and South Downs will be facing increases of £5,200 a year. Those figures show the level of pain among mortgage holders and that will only grow in the coming months.
We should remember that those who have bought their own homes have done nothing wrong. They have done what generations did before them: they have worked hard, saved for a deposit and taken pride in having a home of their own. The security that comes with that has for many turned to dread, as month after month they receive a letter from their lender telling them that their bills are going up by hundreds of pounds a month. In my constituency, 6,800 households face paying an extra £1,800 a year for their mortgage, and that comes on top of the extra that people are already paying for energy, food and everything else.
The Resolution Foundation says that the average figure across the country is £2,900 a year more, but we must remember that that is an average. Depending on where someone lives—we have heard this through the debate—the real figure could be higher. In Uxbridge, for example, it is £5,200 a year. In Selby, it is £2,700 a year. And it is not just mortgage holders who are affected, but renters too, because the people they rent from are seeing their mortgages rise as well. Last year, private sector rents rose by more than 10%, and the proportion of people’s income being used to pay rent is rising too.
The inflation and interest rate figures we saw last week showed an economy and a plan that has been blown off course, because this was not the plan that the Prime Minister and the Chancellor had—this is not how it was supposed to be. Their plan was to bury last year’s disastrous Tory mini-Budget under 10 feet of concrete. If it was to be remembered at all, it was supposed to be thought of as a bad dream, from which we had all mercifully woken up, but their preference was for it never to be spoken of again. Their hope was that they would steady the ship, possibly get some small amount of economic growth and then offer tax cuts either this autumn or next spring, after which a general election would be called.
After 13 years of policy failure, that was all they had left. They certainly could not run on their record, because nothing is working better now than it was when they inherited it in 2010. They certainly could not run on hope for the future, precisely because their record is so poor and no one would believe them. But even the plan they had has turned to dust, because reality has intervened—their own economic mismanagement has intervened. Their plan turned to dust because the Tory mini-Budget was not the end of something; it was the start of something. The instability that it created has carried on and on, and the price is still being paid. The Prime Minister set out a target to halve inflation, but last week core inflation went up, not down. Once again, it was higher than expected and, once again, it was the highest in the G7.
I am grateful to the right hon. Gentleman for giving way. What is the Labour party’s view on forecasting and the Bank of England? It would be interesting to hear that, because it has been commented that forecasting by the Bank of England is not as accurate as forecasting in other countries, meaning that it is not as easy for outside investors to predict future interest rates. What is the Labour party’s view on that and, in particular, what is its view on requiring the Monetary Policy Committee in the UK to do a dot plot on future interest rates, as Federal Reserve governors do, to help with any confusion about forecasts?
We are not going to join the chorus of Government Members attacking the Bank of England. I thought the hon. Gentleman was rising to raise the issue of the 15,000 households in his constituency that are facing an increase in mortgage payments of more than £3,000 a year.
We all wanted to see a recovery, but we do not have a recovery. We have deepening financial difficulties for millions of households. The Government were desperate to say that the worst was over, but for anyone remortgaging over the next couple of years, the worst is not over—it is still to come. Most people on fixed rates have not refinanced yet, and the rolling financial thunder of mortgage renewals will continue month by month, as households receive those letters from their banks and building societies. That is the reality of the Tory mortgage bombshell.
The Chancellor and the Prime Minister were supposed to be the fix-it crew, but things have not been fixed at all. Borrowing costs are even higher now than in the wake of the disastrous Tory mini-Budget last year. Let me be clear with Treasury Ministers: if they are doing worse than the last Prime Minister and the last Chancellor, they are not fixing anything. That begs the question, what is the point of them? They have nothing left to offer. They are caught between telling the country not to risk it with Labour, with their little dossiers full of made-up pledges, and then adopting pale imitations of our policies, whether on the windfall tax, the NHS staffing plan or the voluntary mortgage proposals that they announced on Friday. Time after time, they have no ideas of their own; all they have left is a pale imitation of what we have already proposed.
We wanted a mandatory plan, and that is what is at the heart of our motion today. The truth is that the Tory party has shredded its own economic credentials—the Tory party of sound money, which saw debt top 100% of GDP last week; the Tory party of low taxes, which has lifted the tax burden to the highest level in living memory. There is literally no point to this Government. They are running out of options and they are running out of road.
We are not speculating about what might happen in the future. We are talking about a real crisis, with a real cost of living squeeze on real people, right now, and it has all happened on their watch. After 13 years, they have run out of excuses and run out of people to blame. From Brussels to the blob and now the Bank of England, there are no scapegoats left. Their sense of entitlement to rule is matched only by their total unwillingness to accept any responsibility for anything that happens while they do rule. The Prime Minister says he is “on it”. What a reassurance to working people! I do not know what he is on—usually, a helicopter—but I know it is not working.
The Government cannot fix the problem, because they are the problem. The answer for the country is not another iteration of a Tory project that has already failed over and over again. It has failed on the cost of living crisis. It has failed on public services. And it is failing on mortgages, too. It is time for change, but the Tories cannot offer it. It is time for recovery, but they have failed to deliver it. It is time for an election and a new start, and the sooner they come, the better.
I am afraid that, with the exception of my colleagues, that was an unedifying parade of clone speeches that would wear out an average plagiarism detector. When I look at Opposition Members and hear their contributions today, I find it personally dispiriting. As the Minister responsible for financial literacy, I clearly have a great deal more to do.
As my hon. Friends have rightly observed, we are not alone in our fight against inflation. Countries across western Europe and, indeed, the rest of the world are seeing the same trends, driven largely by Putin’s illegal war in Ukraine and the aftermath of the covid pandemic.
I will give way in a moment. Let me say this in all seriousness: the only bombshells that we should be talking about are those that are falling on the Ukrainian people, and it cheapens the Opposition that we hear again and again the slogan of the week, and what we do not hear about is the broader geopolitical and macro environment in which this country finds itself. The British people have a much greater awareness of these matters than those on the Opposition Benches.
The Minister mentions global factors, but last week the Bank of England noted that since its last decision, the swap rate—the key rate that influences mortgage interest rates—had increased almost twice as much in the UK than in the US and more than three times as much in the UK as in the euro area. Does the Minister agree with the Bank of England?
I am grateful that we have belatedly found some international comparisons. The hon. Gentleman will therefore understand that we are seeing exactly the same rises—sometimes a little more, sometimes a little less—across most of the developed western economies. That is why this Conservative Government are taking action. We have helped people through these difficult times by giving the average household—[Interruption.] Do Members know how much? We are giving the average household £3,300 at a cost of £94 billion to the Exchequer. That is one of the largest support packages anywhere else in Europe. I will happily give way if any Labour Member wishes to challenge that.
When it comes to our generosity, this Government have increased the national living wage and pensions by record amounts, because this is a Government who will always put the vulnerable first. In addition to the explanations given by the Chancellor in this place yesterday, the Chief Secretary to the Treasury, in his fantastic remarks earlier today, set out in some detail our support for those struggling with their mortgage payments in these difficult times. The Chancellor’s new mortgage charter provides peace of mind about extending an existing mortgage or moving on to interest-only payments for six months, giving those who are worried about mortgage repayments some valuable respite. Vitally, it also gives genuine security to those who are at risk of losing their homes because they fall behind on mortgage payments.
I will happily respond to the hon. Member. Not only did Opposition Members oppose the very powers in the Financial Services and Markets Bill that we passed last night that would give the Treasury the ability to direct the regulators—an ability they now somehow seem to want to reinvent—but the exercise of those powers would inevitably take time. What we are hearing from the Opposition is not just a package that in many respects is deficient compared with what the Chancellor and this Government have brought forward, but a path to implementing that package that—rather than taking days, hours and weeks as our mortgage charter will—would take a much more significant period of time. They offer more delay, less help for people and fewer paths to deliver.
The topic of the debate is mortgage and rental costs, but the Minister has not covered the rental side. The last time he came to the Chamber he was asked how many renters are going to be in distress due to this situation. He was unable to answer, because he had not done the assessment. Will he promise to go back to the office and do an assessment on how many renters are affected?
All households are impacted by the higher cost of money that we face. That is why we are focused on supporting all households, supporting those who are the most vulnerable and bringing forward at pace our measures to support the mortgage market. That is also why, since taking power, this Government have restored the overall health of our financial system. It is important that the House understands that mortgage arrears and defaults are today at historically low levels. Less than 1% of residential mortgages are in arrears, a level below that which we saw during the pandemic and significantly lower than under the last Labour Government.
In the last hour it has been reported that two-year UK gilts are at 5.24%, a 15-year high, above the post-mini Budget peak, and markets now see a 70% chance of those rates going over 6% by the end of the year. If it is all going so well, why do the markets not believe the Tories?
I always make a point of not commenting on the markets, in whichever direction they move. The responsibility of Government is to act and the responsibility of this Government is to deliver. We will control what we can control and the markets will do what they do.
The mortgage charter lays out that there will be a minimum 12-month period—I believe that is double the Opposition proposal, but I am happy to take an intervention on that—from any first missed payments before any repossession action is taken. It is important that our constituents understand that these measures offer comfort to those who are understandably anxious about the impact of higher rates on their mortgages and provide support for those who would get into financial difficulties. More broadly, the mortgage market itself remains robust and, because of the actions the Government have taken over the past 13 years, the average homeowner remortgaging in the past year had close to 50% loan to value, indicating that most have considerable equity in their homes.
Help for mortgage holders, but help for savers too: this Government are committed to ensuring that people are supported to save and can access a wide range of competitive savings products. The current range of options available to savers includes some of the highest rates that we have seen in recent years on both instant access accounts and the more relevant fixed-term products, which represent a better apples-to-apples comparison with fixed-term mortgage rates. The top instant access savings rates currently on the market offer around 4.2% and the top one-year fixed rate is much closer to the mortgage rate at about 5.8% annual equivalent rate.
Tackling inflation remains the Prime Minister’s and this Government’s No. 1 priority, and it will remain so until it is tamed. Allowing inflation to go on at the current rate or to grow higher would be the biggest threat to our collective economic security. While we continue on our fight to fight inflation, we will also do what British public expect; we will look at how we can grow the economy over the long term, improve productivity and ensure that no communities are left behind. We continue to take forward supply-side policies to increase the productive capacity of this economy and encourage workers back into work, including rolling out the largest ever expansion of free childcare. All that will set us up for greater productivity.
Let us contrast that with the Lib Dem plan to pile on to inflationary pressures an unfunded £3 billion a year. That is eclipsed only by Labour’s £28 billion a year—Interruption.] Labour Members do not want to hear it; they are talking among themselves. The IFS said that Labour’s £28 billion plan would cause interest rates and inflation to rise. Paul Johnson said that
“additional borrowing both pumps more money into the economy, potentially increasing inflation, and also drives up interest rates.”
That really would be a Labour mortgage bombshell.
In this barmy weather, those thinking of taking a summer holiday should remember that Labour’s economic policy has more flip-flops than the average surf shop: national insurance, corporation tax, the pensions cap, North sea gas, and, yesterday, shelving reform of high street business rates. The fact is that no Labour Government have ever left office with unemployment lower than when they came to power. As my hon. Friend Suzanne Webb reminded us, the note left by Labour’s Chief Secretary to the Treasury in 2010 said, correctly: “I’m afraid to tell you there is no money left.”
This Government are taking action on the economy. We are taking the tough decisions to bear down on inflation, we are supporting the vulnerable, we are helping the economy to grow, and, as the amendment states, we are helping mortgage holders with our new mortgage charter.
To inform the House, I shall put the main Question first. Should it be negatived, I will then put the Question on the amendment.
Question put (
The House divided: Ayes 283, Noes 198.
Question accordingly agreed to.
The Deputy Speaker declared the main Question, as amended, to be agreed to (
That this House welcomes the Government’s drive to halve inflation, grow the economy and reduce debt; particularly welcomes the Government’s new Mortgage Charter which has been agreed by 85 per cent of the residential mortgage market and will provide support to mortgage holders through new commitments and flexibilities to help borrowers who are anxious about rising interest rates; notes the extensive package of cost of living support to help families with rising prices, worth an average of £3,300 per household including direct cash payments to the eight million most vulnerable households; and further believes that Labour’s policies to manage the economy would be inflationary, lead to higher interest rates and put more pressure on mortgage holders and renters.
On a point of order, Mr Deputy Speaker. I rise to seek your advice. Following the ten-minute rule Bill of Andrew Bridgen this afternoon, a number of right hon. and hon. Members of this House have been accused of being in support of grooming children. I have looked at the Metropolitan police’s website, which specifically says:
“Grooming is when a person builds a relationship with a child, young person or an adult who’s at risk so they can abuse them and manipulate them into doing things. The abuse is usually sexual”.
That accusation has been retweeted by the Member for North West Leicestershire. I seek the House’s and indeed your advice, Mr Deputy Speaker, as to what action Members can take to ensure that there is some sort of sanction on that—I believe—unparliamentary behaviour.
Further to that point of order, Mr Deputy Speaker. I do not want to comment on whether there is an appropriate sanction, because I am the Chair of the Committee on Standards, but the tweet that Caroline Nokes referred to says that several Conservative Members
“voted against the motion and in support of the grooming and mutilation of children”.
I suggest that that is incitement of violence against those Conservative Members and Opposition Members who voted against the motion. It is probably also actionable, and if any Conservative Members want to pursue that course of action, I will stand with them.
I wonder how we ensure that we protect the privileges of this House, namely freedom of speech. I would protect the freedom of speech for Andrew Bridgen to be able to say what he did in debate, though I thought it was absolutely abhorrent and despicable. It also chills my bones, as I suspect it does yours, Mr Deputy Speaker, because it feels as if a new section 28 is being introduced by the back door for trans people, just as we used to have for lesbian and gay people. How do we ensure that freedom of speech is guaranteed for the whole House and that we are not abused for doing our job properly?
I thank Caroline Nokes for her point of order and the forward notice of it and Sir Chris Bryant for the further point of order. While we do have privilege to speak as we wish in this House and rules to ensure that that freedom is used responsibly, what a Member says or retweets outside the House is not a matter for the Chair. Nevertheless, Members should remember that moderation is desirable outside the Chamber as well as within it, especially when criticising Members for their conduct in parliamentary proceedings. I am sure that this is not the last we will hear of this particular matter.