Action needed on mortgage costs

This is my fortnightly column which is published first in the Fife Herald, East Fife Mail, and St Andrews Citizen.

‘Mortgage rates soar to highest level in fifteen years’. ‘One in two mortgage borrows fear losing their homes as rates soar’. ‘Rental increases outpace earning for twenty-one months in a row’.

These are just some of the recent headlines which reflect a deeply broken housing system, and a looming crisis for households already struggling with the cost of living. Last year in the wake of Liz Truss’ disastrous mini-budget average mortgage rates spiked to over 6%. Now recent weeks has seen rates spike again, with average interest rates on a two-year fixed deal hitting levels not seen since the financial crisis in 2008.

The direct consequence of increased rates are stark. The Bank of England estimates that over the coming three years nearly a million households will see their payments rise by at least £500 a month. Many people are already facing steep hikes in their costs, simply not knowing how they will pay, with prices of essentials also up across the board.

There is also a direct impact on renters, with costs for buy-to-let landlords pushing up rents. Recent figures from Zoopla showed that the average monthly costs on the rental market increased a staggering 13.1% in Scotland, a steeper increase than any other region of the UK apart from London.

And yet despite all of this the UK Government in choosing not to act. Rishi Sunak and Jeremy Hunt - and Labour leaders as well - have ruled out direct support for mortgage holders who face losing their homes. The Liberal Democrats, in contrast, have put forward costed plans to prevent the disaster being inflicted. Households which have seen their mortgage payments increase by more than 10% of their income could apply for grants of up to £300 a month to help cover the cost of the rise.

The government should also revisit the freeze on Local Housing Allowance which has been in place since 2019, and is increasingly inadequate in the face of soaring rents. Research by the Institute for Fiscal Studies showed that only 5% of properties advertised on Zoopla were affordable for recipients of Local Housing Allowance.

Debates over inflation and interest rates often occur in the abstract. Perhaps that explains some of the more blatantly out-of-touch and tone-deaf statements that Rishi Sunak has come out with, including telling struggling households to ‘hold their nerve’ and insisting that he is ‘totally, 100% on it’. Reality begs to differ.

Increases in interest rates are inflicting economic pain, and real hardship on households. There has to be an answer to that, a way through the economic crises which the country faces which does not mean households losing their homes or renters suffering further.