Jeremy Hunt hails mortgage deal with banks as Labour poll lead surges

Jeremy Hunt hails mortgage deal with banks as Labour poll lead surges

June 23, 2023

Jeremy Hunt says mortgage lenders have agreed struggling Brits can switch to interest-only terms for six months and won’t repossess homes for at least a year after talks in Downing St – as poll shows Labour lead surging to 22 points amid mounting crisis

Mortgage lenders have agreed struggling Brits can switch to interest-only for six months and homes will not be repossessed for at least a year, Jeremy Hunt said today.

The Chancellor hailed the deal after holding a summit with major players in Downing Street this morning – and denied that it was underwhelming.

The talks came amid growing alarm at the pressure on home-owners after the Bank of England hiked interest rates to a fresh 15-year high of 5 per cent in a desperate effort to control inflation.

Mr Hunt said he had secured ‘important’ commitments that temporarily going interest-only or extending repayment terms would not affect credit ratings. 

And in the ‘extreme situation’ where properties have to be repossessed there will be a minimum waiting period of a year unless the mortgage-holder consents.

However, the huge damage being inflicted by the crisis was underlined today as an Ipsos poll found Labour’s lead has extended to a massive 22 points – up six points on last month. 

Jeremy Hunt is urging lenders to help stricken mortgage-payers at a Downing Street summit this morning

The average two-year fix mortgage rate has risen well above 6 per cent this week

The Bank of England surprised markets by increasing rates to 5 per cent yesterday 

Matt Hammerstein, Barclays UK chief executive (left), David Duffy, Virgin Money chief executive (centre), and Debbie Crosby, Nationwide Building Society chief executive (right), in Downing Street today

The huge damage being inflicted by the mortgage crisis was underlined today as an Ipsos poll found Labour’s lead has extended to a massive 22 points – up six points on last month

The government has dismissed Tory calls to bail out home owners with tax breaks and other direct support, as it could fuel inflation.

And there are concerns that moves such as switching to interest-only mortgages will cause more damage later. The overall costs on a £150,000 25-year mortgage would be around £80,000 higher than on repayment term.  

Bosses from major players such as HSBC, Santander and Barclays were at the talks this morning. 

Mr Hunt said afterwards that they were worried about ‘two groups of people’ – those at risk of losing their homes because they are behind on payments, and those facing a huge hit because their fixed term is coming to an end.

He said that banks and mortgage lenders had agreed ‘three very important things’.

‘The first is that absolutely anyone can talk to their bank or their mortgage lender and it will have no impact whatsoever on their credit score. That’s really important. A lot of people worry about that,’ Mr Hunt said.

‘The second is that if you are anxious about the impact on your family finances and you change your mortgage to interest-only or you extend the term of your mortgage and you want to go back to your original mortgage deal, within six months, you can do so, no questions asked. No impact on your credit score. That, I think, is going to give people a lot of comfort and stop people worrying about having conversations with their banks when they are worried about their financial situation.

‘The final thing is for people who are at risk of losing their home in that extreme situation, the banks and mortgage lenders have a number of things in place. The last thing that they want to do is to repossess a home, but in that extreme situation they have agreed there will be a minimum 12-month period before there’s a repossession without consent.’

Leaving Downing Street, NatWest boss Alison Rose said: ‘We had a very productive meeting. We’re doing everything we can to help customers and help with the anxieties. 

She added they were ‘very keen’ to help everyone. 

Chief executive of Lloyds Banking Group Charlie Nunn said that they had a ‘good working discussion with the Chancellor’. 

Earlier, Treasury committee chair Harriet Baldwin said mortgage holders should be shown the same ‘forbearance’ by banks during the current period of rising interest rates as they were during the coronavirus pandemic.

She told BBC Radio 4’s Today programme: ‘One of the things we wrote to the regulator, the Financial Conduct Authority, about is making the changes that are necessary to put in, to almost enshrine in their rulebook the kind of forbearance that people were shown during the pandemic.’

She said mortgage holders worried about renewals of their terms should have a ‘grown-up conversation’ with their lender as there will be a ‘variety of things that they will do to help you through what is clearly going to be a difficult period’.

Asked whether banks should be instructed by the FCA, the Bank of England or ministers to provide such assistance, the Tory MP said the regulator was being ‘pretty rigorous’ on the issue.

‘There is going to be a new consumer duty that is going to apply to banks from next month, which was put into legislation last year, and I think that will again require banks to demonstrate how they are treating their mortgage customers with the right degree of forbearance during this difficult time,’ she added.

Today’s talks were a follow up to a meeting in December at which the banks agreed to make it easier for struggling customers, including measures such as extending the term of a mortgage or allowing temporary reductions in payments.

Financial expert Martin Lewis, who attended that meeting, said that ‘none of the suggestions have seen any real fruition’.

Mr Lewis, who held fresh talks on the issue with the Chancellor this week, said it was vital that people accessing mortgage help suffered only ‘minimal impact’ on their credit rating.

He added that the banks had ‘pushed back’ against the idea in December but said that without it people were ‘reticent to make a decision, which can lead to snowballing problems’.

Shock figures this week showing inflation still not slowing down sparked the Bank of England pushing rates to 5 per cent 

Treasury sources confirmed the issue was on the table at today’s summit, but warned that a deal would not necessarily be done.

However, one Conservative source said the idea could be a ‘game changer’ and that ‘all eyes are on this summit because the Treasury think they can get the banks over the line on the idea of allowing people to take capital payment holidays without triggering a negative credit report’.

The source added: ‘That would be a game changer for many families struggling with these crippling interest rates rises, because they could then just pay the interest for a time while they got their finances in order.’

High street banks have faced criticism for raising their lending rates much faster than their savings rates during the past year. Mr Lewis said this week: ‘That gap should be tightened and political pressure needs applying to ensure either better mortgages or better savings or best, both.’

Repossessions and arrears remain below pre-pandemic levels but today’s meeting discussed the banks’ latest data and future projections. 

Mr Hunt will hold a further summit with the UK’s major regulators next week to discuss ways to keep prices under control and squeeze more value for consumers.

The unprecedented meeting will involve the Competition and Markets Authority and those bodies governing utility sectors including energy, water, broadband and rail.

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