Mortgage and Rental Costs

Naz Shah Excerpts

Tuesday 27th June 2023 Commons Chamber

[Suzanne Webb (Stourbridge) (Con)]

I rise to oppose the motion in the name of the official Opposition and to support the Government amendment. The Labour motion is narrowly worded. Yet again, it tries to invoke hysteria and crisis and to undermine those we serve, and it completely misses the facts. We cannot allow the electorate, especially young people, to be indoctrinated by the sort of nonsense contained in the Opposition’s motion, which claims that it is all the Government’s fault.

These are the facts. First, on mortgage rates, the impact of the global financial crisis under Labour back in 2007 meant that the base interest rate fell to its lowest level for 300 years. Starting at 5.7% in July 2007, rates had fallen to 0.5% by March 2009, with a further fall to 0.25% in August 2016. There was a very slight rise back to 0.5% in November 2017, and then in 2021, as covid-19 loosened its hold on us all, globally we were met with persistent inflation caused by a worldwide supply chain crunch and, of course, Putin’s war. Those are the simple truths.

[Naz Shah (Bradford West) (Lab)]

Will the hon. Member give way?

[Suzanne Webb]

I am going to make progress, because the Minister was very generous in taking interventions, and I want to ensure that everybody gets to speak.

The Bank of England, not the Government, pushed the rate up to 0.25% in December 2021, to 0.5% in February 2022 and then to 0.75% in March 2022—the highest it had been since the summer of 2018. That has continued, and we are now at 5%. I must agree with the Chancellor that there were flaws in the Bank of England’s economic forecasting. As the Governor himself has said, the Bank’s forecasting has not been accurate. It was for the banks to assess the financial competence of those applying for mortgages in the first instance. Banks would have understood that interest rates were artificially low—the lowest in 300 years of history—and that at some point they would naturally go up again, and they did. It took the huge global fiscal shock of a pandemic and a war in Europe to push interest rates up to where they are now, but such interest rates were common under Labour before it crashed the economy in 2008. We should not forget that.

If we look at the rates before the economy crashed and before Labour bled our economy dry and left no money, it keeps the interest rates “crisis” that Labour likes to talk about in perspective—or, to put it more succinctly, as the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) said in the note he left to his successor in 2010,

“Dear Chief Secretary, I’m afraid there is no money. Kind regards—and good luck!”

That about says it all, and I will never tire of repeating it to remind people what they could be voting for.

Now for more facts. The employment market is strong. I recently visited my local jobcentre in Stourbridge. Those who worked there told me that the local job market is buoyant and that young people in particular are finding jobs. According to the International Monetary Fund, the OECD and the Bank of England, the prospects for the UK economy are bright. Even on mortgages—the subject of this debate—defaults remain at pre-pandemic levels, and the proportion of disposable income spent is almost half what it was in the 1990s. Banks around the world are raising interest rates to fight rising inflation caused primarily by Putin and a global pandemic. This is a global problem. Interest rates are higher in the US, Canada and New Zealand.

I absolutely cannot allow the Labour party’s economic incompetence to go unchallenged. Black hole after black hole after supermassive black hole is unearthed by my colleagues and I, as Labour seeks to twist and turn into whatever position of opportunism it favours in any given week. My right hon. Friend the Chief Secretary to the Treasury has uncovered another casual £3 billion from the shadow Chancellor’s U-turn on the digital services tax. That is in addition to another black hole 10 times the size—£30 billion, simply gone—from Labour’s plans to scrap business rates without replacement. Naturally, I look forward to whatever reply my right hon. Friend receives, but I doubt it will be forthcoming.

Perhaps the Opposition could tell us how Labour’s £90 billion of unfunded spending commitments would lead to lower inflation and interest rates—I await that with interest—or how Labour’s plans for £28 billion of borrowing would lower inflation and interest rates. The Institute for Fiscal Studies certainly does not think it would, and neither do I. We should also be mindful of not dragging language to the extreme. In Labour’s language, everything is a “crisis” these days—cost of living crisis, energy crisis, mortgage crisis. It cheapens the term and undermines all we serve.

I support the Government amendment, although I do not think we needed to use the word “charter”. I think this is just banks doing the right thing for their customers, nudged by a fiscally responsible Government. I will finish as I started, by saying that we cannot allow the electorate, especially young people, to be indoctrinated by the sort of nonsense contained in the Opposition’s motion, which tries to claim that it is all the Government’s fault. It is not. I will be supporting the Government amendment.

--- Later in debate ---

[Naz Shah (Bradford West) (Lab)]

The Tory mortgage bombshell is the latest Tory-created crisis to hit hard-working families, adding to the litany of errors over the last 13 years made by an economically arrogant, incompetent and ignorant Tory party. According to the financial data provider Moneyfacts, the average two-year fixed residential mortgage rate has risen to 6.23%, up from 6.19% just last Friday. This is the highest since last November, when the property market was thrown into utter chaos after the Tory mini-Budget, otherwise known as the Budget that broke Britain. Because of the mess they have created, banks are now withdrawing mortgage deals, and the average household is facing a hike of almost £240 a month more on their mortgages.

In my constituency, this latest hike in interest rates will impact nearly 7,500 households, with an average increase in payments of £1,300 a year. As Opposition Members have stated already, these increases come at a time when families are already living hand to mouth. The sad reality is that Conservative Members just simply do not get it. Mortgage payments are up—by £1,300, if not more—while energy prices are up by thousands of pounds per household, supermarket food prices are up by 15% this year, council tax is up by 5% and car insurance is up on average by 43%. Again, they just do not get it.

The Prime Minister probably does not understand much, but who can blame him when he is sitting in his private plane, wearing his £3,000 suit and sipping coffee out of his £180 mug, with his head stuck in the clouds. Meanwhile, back down here on earth, in places in the real world such as Bradford West, hard-working families are being forced to skimp on daily necessities such as three meals a day and are on the brink of collapse. The UK economy’s ever-worsening crisis is not a recent misfortune. It is the consequence of a total abdication of economic prudence by the Tories over the last 13 years. The poor state of the UK economy today cannot be solely pinned on a global crisis. We need to call it out loud and clear that our ailing economy has been orchestrated by a string of Tory self-inflicted policy errors.

Every country faced economic impacts due to the pandemic, but our economy bounced back at the slowest rate of any G7 nation, with our GDP at the beginning of 2023 0.5% lower than at the end of 2019. Every country faced the economic impact of the global financial crisis, but reckless Tory austerity since 2010 has resulted in more than £0.5 trillion of lost public spending and a weaker economy. All the G7 nations faced the effect of rising energy prices caused by the war in Ukraine, but the UK’s over-reliance on energy, coupled with the Tories depleting our ability to generate our own energy, has left us the most poorly equipped to deal with rising energy prices.

The Tories’ disastrous 13 years in charge will be remembered for crashing the economy, poor growth, sky-high inflation, worsening living standards and the disastrous management of Brexit. Each of those alone has battered hard-working families, who have been plunged into poverty, but the combined litany of self-inflicted, delinquent and scandalous errors has left the UK a whole lot worse than in 2010.

We must hold the Conservatives to account, and the worst thing is they were warned. Martin Lewis, the finance expert, has said he warned the Government about mortgage market issues last year. He said about the current mortgage shock:

“Yet now the time bomb has exploded and we're scrambling about what to do.”

That is what the Tories do: they sleep at the wheel, then try to deal with the wreckage after the crash, and then blame everyone else.

On action on mortgages, it was Labour’s announcement that forced the Government to take urgent steps. However, Labour has called for mandatory measures to be placed on banks so that no one is left without support; the Government measures are completely voluntary and do not cover all of the mortgage market, with some 15% of the market for main residences missing out and no buy-to-let coverage.

Recently, the former Prime Minister fell off his tightrope. Now the Tory party has got rid of the clown, it is time to get rid of the circus. Give us a general election.