Mortgage and Rental Costs

John Glen 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.

[Imran Hussain]

Will the Minister give way?

[John Glen]

I wish to make more progress.

Where there are non-inflationary measures that we can take to relieve the anxiety faced by families, we will do so and we will do everything we can to address the situation. That is why, on Friday, the Chancellor met the UK’s principal mortgage lenders, alongside senior representatives from the Financial Conduct Authority and UK Finance, to agree new support for those struggling with their mortgage payments.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I am grateful to the Minister for giving way. Can he give an answer to my right hon. Friend the Member for Leeds West (Rachel Reeves), who asked whether the mortgage charter, which the Chancellor announced yesterday, will cover buy-to-let mortgages? Why exactly has the Chancellor not made that mandatory?

[John Glen]

I will come on to set out in detail what arrangements we have made. As the Chancellor set out pretty clearly yesterday, we will hear in the next couple of weeks the details of that agreement, which includes a growing number of lenders—it currently covers 85% of lenders in the country.

[Imran Hussain]

rose—

[John Glen]

I wish to make some more progress and then I will take some interventions in a moment.

At that meeting on Friday, the Chancellor secured agreement from lenders to a new mortgage charter, which we published yesterday. It sets out what support customers will receive. We are proud to say that, over the weekend, more lenders signed up to the charter, and we encourage further lenders to join that 85% of mortgage market providers.

The charter provides support for two groups of people in particular. The first group is those who are worried about their mortgage repayments. If they want to switch to an interest-only mortgage or extend their mortgage term to reduce their monthly payments, they will be able to do so with the option of switching back to their original mortgage deal within six months without a new affordability check or affecting their credit score.

For most people, the right course of action will be to continue to make payments on their current mortgage. Keeping up full repayments means that they will pay less interest overall. But this new measure means that people will be able to opt for a lower-cost approach for six months with full reversibility, giving them the peace of mind of knowing that they can try out a new approach and still change their mind later on.

[Paula Barker (Liverpool, Wavertree) (Lab)]

I thank the Minister for giving way. He is being very generous with his time.

With not all the mortgage market covered by the charter, there is a worry that around 1 million households could miss out on the support. Can the Minister guarantee that the measures that were outlined will be available to everyone struggling with their mortgage payments, not just those who happen to have a mortgage with one of the banks that is on the list of those that have cosy chats with the Chancellor?

[John Glen]

I hope that more and more lenders will be added to those 85% of providers. The details will be known in the next few weeks. This comes on top of the FCA’s rules around lenders having to take an individual approach to the circumstances of their customers, especially those trying to find a way through when they fall into difficulty.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Will the Minister give way?

[John Glen]

No, I wish to make a bit more progress. I will come back to the hon. Lady in a moment.

This measure will take effect in the next few weeks and it means that a homeowner with £100,000 outstanding on their mortgage over 15 years can change their payments—with no impact on their credit rating—by extending the mortgage term by 10 years, which could save them over £200 a month, or by moving to interest-only payments, which could save them more than £350 a month. A further measure for this group of customers means that, if they are approaching the end of a fixed-rate deal, they will have the chance to lock in a new deal with the same lender up to six months ahead. However, they will still be able to apply for a better like-for-like deal with the same lender, with no penalty, if they find one when their current deal ends.

[Emma Hardy]

I understand why the Minister wants to have a voluntary charter, but does he agree that what we are actually seeing from the banks—this was raised on the Treasury Committee—is that they are very quick to raise interest rates on mortgages, but not so quick to raise them on savings? The difference between the interest rates being raised on mortgages and those being raised on savings is around 50%, which is completely unfair. When the Chancellor meets the banks, will he also add to the conversation the unfairness that exists when it comes to interest rates on savings? That is why I am reporting back to the Minister on the need to mandate this—because we cannot always assume that the banks will act in the interests of their customers.

[John Glen]

I thank the hon. Lady for her point. As the Chancellor said yesterday, he did raise that with lenders on Friday. We will continue to work closely with them on those disparities where they exist. My colleague the Economic Secretary to the Treasury, who is responsible for the relationship with financial services institutions, will also be attending to this issue. It is right that, with interest rates rising, banks should be looking to put as much of that rise as possible on to the savings rates that they offer to consumers.

[Imran Hussain]

Time and time again the Minister seems to be ducking the central issue in this debate, which is that the charter the Government have proposed will not cover millions of people and will not provide support. Why will he not instead subscribe to the Labour position today and require all lenders to do it, so that everybody can get support? Answer the question Minister.

--- Later in debate ---

[John Glen]

I appreciate the passion with which the hon. Gentleman presents his point, but we have made an agreement with the FCA and with lenders, and in the next couple of weeks the details will be available for consumers and mortgage holders up and down the country. As I say, we have already moved from three quarters to 85% of lenders and I expect others to join in due course. We will continue to have dialogue with the FCA and to look at further ways to help consumers.

The purpose of our intervention is to provide people with more flexibility and optionality to find the best deal for their circumstances. Mortgage arrears and defaults remain at historically low levels, with less than 1%—I think it is 0.86%—of residential mortgages in arrears in 2023, a lower level than just before the pandemic.

[Paul Holmes (Eastleigh) (Con)]

We heard the shadow Chancellor outline the utopian elements of her compulsory scheme. Can the Chief Secretary outline which scheme goes further—our scheme, which is not mandatory but delivers 12 months before repossessions happen, or the Labour Party’s mandatory scheme?

[John Glen]

My hon. Friend makes a wise point, and I will come on to talk about some of the other measures in a moment. For those families involved, it is extraordinarily distressing to lose their home, so we will do all that we can to support people who find themselves in such a challenging financial position.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

Will the Minister give way?

[John Glen]

No, I am going to finish answering the previous point.

As part of our strong regulatory framework for mortgage holders, banks and lenders already provide tailored support for anyone struggling, and they deploy highly trained staff to help those customers. Support offered includes temporary payment deferrals and part interest, part repayment, as well as extending mortgage terms or switching to interest-only payments. To supplement that, we agreed as part of the mortgage charter on Friday that, in the extreme situation in which a lender is seeking to repossess a home, there will be a minimum 12-month period from the first missed payment before there is a repossession without consent. I believe that that goes rather further than what the Opposition were suggesting.

[Barbara Keeley]

This crisis is already having an impact on renters too, and the Chief Secretary is not touching on that in his speech. I have a constituent on a rolling private tenancy who is worried sick that her landlord is going to evict her. She is worried about ending up in a hostel with her teenage daughter. She works full time and pays her way. That situation is shared by so many. Does the Chief Secretary not agree that there should be support for renters, and that the way to achieve it is to back Labour’s renters charter, including the halt to no-fault evictions and a four-month notice period for landlords?

[John Glen]

I do not accept that, but I do accept that there are challenging situations for our constituents up and down the country. That is why this Government have intervened and are working in this way with lenders to find a constructive package of interventions to meet the situation those constituents are in.

Anyone who is worried that they could be in those difficult situations should know that they can call their lender for advice without any impact whatsoever on their credit score. Lenders will also provide support to customers who are up to date with payments to switch to a new mortgage deal at the end of their existing fixed-rate deal without another affordability test, and provide well-timed information when their current rate is coming to an end. Taken together, those measures should offer some comfort to those who are anxious about the impact of high interest rates on their mortgage and provide support to those who get into extreme financial difficulties.

[Catherine West]

May I return briefly to the point made by my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley)? Last time I asked the Economic Secretary to the Treasury about the number of renters estimated to be impacted by this situation, he did not have an answer. Do Ministers on the Treasury Front Bench have an answer today on how many renters will be affected by this crisis?

[John Glen]

The interventions we have made provide significant scope for assistance. To find an accurate number would be very difficult, but we will continue to work with industry and with lenders to find maximum flexibility and interventions to support them at this difficult time. While we roll out those measures, tackling inflation remains the No. 1 priority of the Prime Minister and the Government. Inflation makes every person in this country poorer and it has to be tackled head-on.

Notwithstanding that, I am fully alive to the fact that some people remain in real distress. I assure hon. Members and their constituents that we will always stand ready to help where we can. That is why at the Budget we announced that the energy price guarantee would be extended for a further three months. That extension was funded in part by the energy profits levy that this Government introduced last year, recognising that profit levels in the sector had increased significantly due to those very high oil and gas prices, caused by global circumstances—including, of course, Russia’s invasion of Ukraine.

Alongside holding down energy bills, freezing fuel duty, increasing universal credit and raising the national living wage and pensions, we are giving up to £900 in cost of living payments to households on means-tested benefits. Taking those measures together, the Government are already supporting families with one of the largest support packages in Europe, worth £3,300 per household on average.

The Government’s approach makes targeted interventions to protect the most vulnerable, while maintaining a laser-like focus on tackling inflation. I believe that that stands in sharp contrast to some of the policies offered by opposition parties. The Liberal Democrats are calling for a £3 billion mortgage protection fund, which would simply pour fuel on the fire of inflation, making it harder to bring prices down. That would be such a damaging move that it is apparently even too extreme for those on the Labour Front Bench to contemplate.

However, I would say that the Labour party is not without its own flaws when it comes to offering unfunded inflationary policies. The media reports that the right hon. Member for Doncaster North (Edward Miliband) has had his wings clipped by the Leader of the Opposition for his excessive spending proposals, but in reality the shadow Chancellor is only slightly delaying Labour’s £28 billion spending spree to the second half of the next Parliament—an amended timetable, but the same reckless policy.

We said that we would halve inflation, not because it was an easy thing to do, but because it was the right thing to do. History and the best economic insights that we have today tell us that the best way to beat inflation is to stick to our plan, backing the Bank of England’s monetary policy decisions. We will stick to the plan, because it is the only way we can give relief to families and reprieve to businesses. As we have done before, we will face down these economic challenges while supporting the most vulnerable and setting us up for economic growth.

Since a Conservative Government came into power in 2010, the UK economy has grown more than those of major countries such as France, Italy, or Japan, and about the same as Europe’s largest economy, Germany, which is now in recession. We have halved unemployment, cut inequality and reduced the number of workless households by 1 million. We have protected pensioners, those on low incomes and those with disabilities. We will now overcome this inflationary period, and offer a helping hand to those who need it as we do so.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Before I call the SNP spokesperson, I think I will have to give some firm guidance about time limits. My initial guidance would be six minutes, just so the first speaker on the Government side is aware.