Mortgage and Rental Costs

Gareth Thomas Excerpts

Tuesday 27th June 2023 Commons Chamber

[The Chief Secretary to the Treasury (John Glen)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“welcomes the Government’s drive to halve inflation, grow the economy and reduce debt; particularly welcomes the Government’s new Mortgage Charter which has been agreed by 85 per cent of the residential mortgage market and will provide support to mortgage holders through new commitments and flexibilities to help borrowers who are anxious about rising interest rates; notes the extensive package of cost of living support to help families with rising prices, worth an average of £3,300 per household including direct cash payments to the eight million most vulnerable households; and further believes that Labour’s policies to manage the economy would be inflationary, lead to higher interest rates and put more pressure on mortgage holders and renters.”

After two decades of low inflation, the world has been confronted with a bout of fast-growing prices, and we are not alone. As a result of rising prices, central banks around the world, including in the United States, Japan, New Zealand and the European Union, have been raising interest rates in order to force down the rate of price rises. As all Members will be aware, last week, the Bank of England’s independent Monetary Policy Committee raised rates to 5%. Let me say at the outset that the Bank of England and its Monetary Policy Committee has the full support and confidence of this Government, and will continue to do so as it takes whatever action is necessary to return inflation to the 2% target in the medium term. As the Chancellor was clear when addressing this place yesterday, he will not take action that undermines the Bank of England’s monetary objectives.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

The Minister will be aware that the latest data on mortgage rates specifically shows that, since the mini-Budget, they have increased faster here in the UK than in the US. That gap in mortgage rates means that someone here with a mortgage of £200,000 will be paying £1,000 a year more than in the US. What is the Minister’s explanation for that?

[John Glen]

I am here to account for what has happened in the UK. Obviously, there are differences—[Interruption.] If I may answer. There are differences across the EU and the US. What I am telling the House, which is quite transparently clear, is that inflationary pressures are affecting all economies at the moment, and it is my responsibility to account for what we are doing as a Government.

--- Later in debate ---

[Gareth Thomas (Harrow West) (Lab/Co-op)]

The rise in interest rates last week to a 15-year high will be profoundly worrying for many of my constituents, particularly the many homeowners with a mortgage, but also those privately renting who are worried that their landlord might now put up their rents at a time when it is very difficult to find a genuinely affordable home to rent in my constituency. It is estimated that there are 8,900 households in my constituency facing an average increase in their annual mortgage payments of £5,400. In the neighbouring Conservative-held seats of Harrow East some 7,800 households face an estimated annual mortgage payment increase of £6,200 and in Ruislip, Northwood and Pinner 9,500 households face an average annual increase in mortgage payments of some £7,000.

Harrow has one of the highest rates of home ownership and owner occupation in London. Families move out to Harrow because family homes have traditionally been more affordable than in inner London, and we have excellent schools and very good transport links. The Tory party’s mortgage bombshell threatens the dreams of too many Harrow families—dreams of owning and investing in their own homes, of being able to always afford the rent for the home they live in, of being able to provide a stable and secure place to bring up their children and to look after older family members and still to be able to afford a good quality of life with good holidays and trips out. Those ambitions are much tougher now for even more families in my constituency because of the Conservative mortgage bombshell. In short, close to 18,000 households in the London Borough of Harrow face an average increase in mortgage payments of between £450 and £580 a month.

Those figures are devastating for family finances. Ever more mortgage deals have been withdrawn by the banks. Moneyfacts data suggests that the typical rate on a two-year fixed rate loan have increased to almost 6%, double the rate of a year ago, and the independent Resolution Foundation estimates that by 2026 some 6.5 million households across the country will have been affected by the post mini-Budget rise in mortgage rates. It is not just homeowners who are going to be hardest hit: charities and property experts are understandably warning that the rapid rise in borrowing costs is not just having an impact on owner-occupiers but is contributing to record rent increases.

I am fortunate in Harrow to have a community that is determined to do what it can to help those in real need. Harrow food bank, London’s community kitchen, My Yard Harrow and Soul Kitchen Harrow provide an impressive and dedicated offer to families in dire need. They should not have to do that, but energy bills and food prices are already high, and if mortgage costs continue to feed through into rent increases, the pressure on lower-income families will be even more profound and disturbing.

Conservative Members like to claim that what is happening here is part of a global crisis or is just down to the Bank of England’s incompetence. There are of course global factors in play and it is also true that the Bank of England has questions to answer, but the disastrous mini-Budget last year and 13 years of economic failure have left our economy far weaker than it should have been, and the mortgage crisis is clearly worse in the UK than in other European countries. As my right hon. Friend the shadow Chancellor of the Exchequer said, mortgage rates in Germany, France, Ireland and the Netherlands are typically lower than here.

I strongly support the plans set out by my right hon. Friend. She has forced the Chancellor to take some action, but it does not go far enough to help those renting and those facing fast-rising mortgage costs. Mandatory action is required to support mortgage holders. It should not be up to the banks and those offering mortgages to decide whether they want to do the right thing; they should be forced to comply and to help, and we must certainly end no-fault evictions straight away.

The British people deserve better than they are getting from the Conservative party. Homeowners in Harrow should not be suffering the ever-increasing burden of higher mortgage costs. Ministers could do more to help. They should not be leaving 1 million people unprotected; they should back Labour’s plan today and then they should call a general election.