Many mortgage brokers have said they would not be in favour of a government intervention on mortgages at this point, and that instead the government should focus on getting inflation under control.
Over the weekend, there was further chatter of whether or not the government should step in to support mortgage borrowers who are having to contend with significant jumps in their monthly mortgage repayments.
On Friday (June 16) the Liberal Democrats called on Rishi Sunak to hold an emergency summit with banks and mortgage lenders to discuss support for homeowners.
I, for one, would rather see a review of the effectiveness of the Bank of England’s monetary policy Jamie Lennox, Dimora MortgagesSince Friday, a further 240 residential mortgage products were pulled by lenders as the average interest rate on a two-year fixed mortgage surpassed 6 per cent.
On top of this, a further base rate increase is widely expected this week when the Bank of England’s monetary policy committee will meet again.
However, many have warned against government involvement at this point, including the Intermediary Mortgage Lenders Association, who has said support can be provided more effectively by lenders directly.
Likewise, many mortgage brokers have said they are against the idea.
Dimora Mortgages director, Jamie Lennox said as much as he would love to see support given to mortgage customers, it could further fuel inflation.
“If the government starts to help mortgage holders, tenants will also be asking for the same and it would be a case of where does it end?,” Lennox said.
“With many experiencing large increases in rent, there would be public outcry if support wasn’t offered further.
“What is clear is [that] raising the base rate hasn’t solved the cost-led inflation we are experiencing and I, for one, would rather see a review of the effectiveness of the Bank of England’s monetary policy,” he added.
Similarly, EHF Mortgages managing director, Justin Moy said the government needs to focus on driving down inflation and added that giving mortgage holders relief will “only make the problem worse in the long-term”.
“The government needs to deal with the source of the problem. Prolonged low rates and exceptional inflation have created this perfect storm of mortgage turbulence,” Moy said.
“Swift action to reduce inflation, and keep it at a sensible level, along with sensible mortgage rates, will give us the best outcome in the shortest term,” he added.
Others also noted that any interventions could further spook the markets, causing gilt yields - and subsequently mortgage rates - to rise further.
“Get inflation down, and interest rates will follow. That's where the Government's focus should be,” Graham Cox, the founder of SelfEmployedMortgageHub.com said.
He added: “The government, which claims to believe in free markets, should prove it by not intervening.”
6% rates?
Elsewhere, brokers expressed frustration on the reporting of the average 2-year fixed rate passing 6 per cent.
One adviser described it as “irresponsible scaremongering” and said there is no such thing as an average rate as each case can differ so much.
Switch Mortgage Finance director, Elliott Culley said “average” is the key word.
“If customers have a good credit score, there are two-year fixed rates below 6 per cent. However, this is in stark contrast to just two to three weeks ago when you could get a two-year fixed rate under 5 per cent. We were even talking about when they might break under 4 per cent a few months ago,” Culley said.
He added: “It shows how quickly the mortgage market is changing, and client.”
jane.matthews@ft.com
