There is a cross-party consensus that Britain as a property-owning democracy should promote home ownership. To that end, 7.5 million people hold a record £1.7tn of mortgage debt. Yet that debt is more exposed to short-term movements in interest rates than in any other advanced country – placing millions of households in danger of extreme privation when, as now, interest rates suddenly rise. It is a lack of duty of care bordering on criminal neglect.
By next December, cumulatively 4.4 million households will have been forced to refix their mortgages at steeply higher rates since Russian tanks rolled into Ukraine last February and interest rates started climbing. Then, two-year fixed-rate mortgages were available at under 3%: today they cost close to 6%. The Resolution Foundation thinktank, assuming that the two-year fix will remain above 6% until next year, estimates that mortgage holders’ annual payments will jump by £15.8bn as their two-year fixes come to an end. Given that so few households have more than £2,000 of savings, the Institute for Fiscal Studies forecasts 2.9 million mortgage holders exhausting their savings completely.
Public trust in the Bank of England and its handling of inflation and interest rate policy has unsurprisingly plummeted to new lows. Last week, its hapless governor, Andrew Bailey, accepted in giving evidence to the House of Lords that mistakes had been made. But his focus was not on institutional reform or innovation that might change the dynamics of the mortgage market, but rather the Bank’s economic model, which had obviously given wrong forecasts. The Bank, he promised, would launch an internal review.
A review? Britain is experiencing the sharpest, fastest rise in interest rates since the 1980s, with more expected – and that after 13 years of rates at 0.5% or below.
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Source: www.theguardian.com
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