Mortgage and Rental Costs

Andrew Griffith Excerpts

Tuesday 27th June 2023 Commons Chamber

[Marsha De Cordova (Battersea) (Lab)]

It is an absolute pleasure to follow my hon. Friend the Member for Birmingham, Hall Green (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.

[The Economic Secretary to the Treasury (Andrew Griffith)]

No, he didn’t.

[Marsha De Cordova]

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.

--- Later in debate ---

[The Economic Secretary to the Treasury (Andrew Griffith)]

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.

[Several hon. Members rose—]

--- Later in debate ---

[Andrew Griffith]

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.

[Alex Cunningham]

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?

[Andrew Griffith]

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.

[Mike Amesbury (Weaver Vale) (Lab)]

But the charter is not mandatory, is it? How will that help the 10,100 constituents of Weaver Vale faced with that mortgage Tory tax bombshell? How will it help them if it is not mandatory?

[Andrew Griffith]

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.

[Catherine West]

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?

[Andrew Griffith]

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.

[Stewart Hosie]

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?

[Andrew Griffith]

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 the Member for Stourbridge (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.

[Mr Deputy Speaker (Mr Nigel Evans)]

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 (Standing Order No. 31(2)), That the original words stand part of the Question.