The chancellor has brought in measures to help borrowers struggling with their mortgages following a hike in interest rates, but is this enough? ITV News Correspondent Libby Wiener reports
Chancellor Jeremy Hunt has brought in three key changes to help home owners after a shock interest rate hike deepened the mortgage crisis.
He met with large lenders including HSBC and Santander in Downing Street on Friday morning as the government came under pressure to relieve the people struggling with the rising costs.
Mr Hunt set out three assurances to mortgage holders, these are the changes:
Three changes made by Jeremy Hunt and bankers to help mortgage holders with inflated payments
Seeking advice will not impact credit score
The first agreement is that anyone can talk to their bank about their concerns and it will "not impact their credit score," the chancellor said.
Homeowners can temporarily change their mortgage loan
Lenders will be able to temporarily extend the length of their mortgage or switch to an interest only mortgage to help them cope with the additional payments - returning to their original deal within six months.
Mr Hunt said there would be "no questions asked" and "no impact on your credit score".
This means, for example, if people with a 25-year mortgage find the new interest rate is making payments unaffordable, they can temporarily ask for their loan to be extended over a 40-year term.
For people who are at risk of losing their home because they cannot keep up with payments; the banks have agreed a minimum 12 month period before their home is repossessed without consent.
But prime minister Rishi Sunak and Mr Hunt ruled out financial intervention, as rates were raised as the Bank of England tries to bring down stubbornly high inflation.
Labour leader Keir Starmer said lenders should be "required" to let people go on interest only mortgages or extend their loan, and they should be allowed to reverse this over time. "Crucially, it musn't affect their [mortgage holders'] credit rating of the individuals coming forward because it's not their fault they are in in this position as the government has exposed them to high mortgage payments month after month after month," he added.
Some backbench Tories demanded support for under pressure borrowers.
Speaking as he left Downing Street, Lloyds Bank boss Charlie Nunn said they had a "good working level discussion, to really think how we can support mortgage customers".
'I'll leave it to the chancellor to announce' - Lloyds Bank boss Charlie Nunn tells reporters outside Downing Street banks are in 'working discussions' with Jeremy Hunt on mortgage support
The Bank of England issued its 13th interest rate hike in a row, this time by half a percentage point from 4.5% to 5% in the sharpest increase since February.
Surprising economists who had been expecting a smaller hike of 0.25 percentage points, the move brought rates to the highest level in nearly 15 years.
The move came in an attempt to reduce inflation, which measures the rate of rising prices, which remained at 8.7% in May despite efforts to bring it down.
Sir Keir Starmer and his shadow chancellor Rachel Reeves are urging ministers to order banks to offer further support, such as temporarily allowing struggling borrowers to switch to interest-only payments or lengthen their mortgage period.
Spelling out the difference in the strategies, the Labour leader said: “The Government is urging, we are requiring. We’re saying you’ve got to do this.”
Financial markets are predicting that interest rates will strike a high of 6% by the end of the year.
There have been warnings that 1.4 million mortgage holders will lose at least a fifth of their disposable income in additional repayments.
They are set to rise by £2,900 for the average household remortgaging next year, according to economists at the Resolution Foundation.
More than 80% of homeowners with a mortgage are on fixed-rate deals, according to trade association UK Finance.
However, around 2.4 million fixed-rate mortgage deals are due to end before the end of 2024, with some potentially heading for a bill shock.
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