Rishi tells struggling families to extend mortgages – as Bank set to raise interest rates tomorrow to new 15-year high
RISHI Sunak has told struggling families to extend their mortgage or go interest only to help with spiralling costs – as the Bank of England is geared up for another rate hike.
The PM urged Brits unable to cope with rising costs to talk to their bank about their options.
It comes as economists prepare to hike interest rates up for the 14th time in a row tomorrow – to a new 15-year high.
Most experts think the base rate will go up from 5 per cent to 5.25 per cent in a bid to try and curb spiralling inflation.
Rishi Sunak insisted that families can “see the light at the end of the tunnel” of inflation, which currently stands at 7.9 per cent.
But he admitted that the UK’s stubbornly high rates was not going down “as fast as I would like”.
The PM told LBC: “But the numbers most recently showed that we’re heading in the right direction, inflation is coming down.”
He told a caller named Jack, who is facing a huge increase in his monthly payments from £1,500 to £2,800 a month, to talk to his bank about spreading out the costs or going interest-only.
Banks met the Chancellor two months ago and agreed there will be a minimum 12 month period before a home is repossessed.
And households can change their mortgage deals without impacting their credit scores too.
However, this will mean people will have to pay off their mortgages for even longer – and could end up coughing up hundreds or even thousands of pounds more.
And the PM suggested that taking out a longer loan would be better than repossession saying: “we don’t want people to lose their homes.”
Jack replied: “I’m already on a 35-year term. I’m in my early 30s.
“I don’t want to be paying it off until I’m in the grave.”
One of Britain’s major housebuilders warned yesterday more are being forced to take on longer terms to cope with the higher costs of borrowing.
Taylor Wimpey said the share of first-time buyers taking on mortgages of more than 36 years had tripled since 2021 – and was now one in four of them.
Earlier this week big UK lenders cut their fixed mortgage deals in a sign that rates may be close to peaking.
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And in another positive sign, public predictions for inflation in a year’s time tumbled from 5 per cent down to 4.3 per cent, according to YouGov research for US bank Citi.
But there are signs the UK economy is slowing – with house prices falling at their fastest annual rate in 14 years last month.
Britain’s services sector has also slowed, with a weaker demand for properties too.
Jeremy Hunt and the Bank of England's package for struggling homeowners
MEASURE ONE
Any homeowner can approach their bank or mortgage lender for advice on repayments without impacting their credit score.
MEASURE TWO
All homeowners will now be able to change their mortgage to interest only and extend the terms of the their loan.
No questions will be asked and there will be no impact on credit scores.
If homeowners then want to go back to their original plan within six months they will be free to do so.
No questions will be asked and there will be no impact on credit scores.
MEASURE THREE
12-month minimum period before banks can repossess homes in extreme situations.
MEASURE FOUR
Customers approaching the end of a fixed rate deal will be offered the chance to lock in a deal up to six months ahead. They will also be able to apply for a better deal right up until their new term starts, if one is available.
MEASURE FIVE
Banks must offer tailored support to anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.