Mortgage help ‘under review’, says Michael Goveon June 18, 2023 at 1:14 pm

Help for people struggling with their mortgages is being kept “under review”, cabinet minister Michael Gove has said.

But any financial assistance would be a decision for the Treasury, he told Laura Kuennsberg.

He also warned any help similar to Covid or energy bill schemes risked driving up interest rates further.

The BBC understands that the Treasury has no current plans to give mortgage relief.

Asked on Sunday with Laura Kuenssberg whether the government would consider stepping into the mortgage market, Mr Gove said there is a “difference between keeping under review and ruling out” a scheme similar to the wages support given during Covid.

But he said if public money is spent to “deal with particular crises” then “you are inevitably adding to the stock of public debt” which puts pressure on interest rates.

“The worst thing to do would be to spend money to provide a short term relief which would then mean that our overall finances were in a weaker position, and interest rates were higher for longer, and inflation was higher for longer,” Mr Gove added.

He said people moving off fixed rate mortgages face “significant increases” which is part of a broader cost of living crisis, but the way to tackle that is to get the pace of general price increases down.

Interest rate rises by the Bank of England to try to get inflation under control are already pushing up mortgage rates, Mr Gove said.

Another big scheme to bail out mortgage holders would add to UK debt, and government payments on that debt, which would push up interest rates further, he said.

The government has no desire to write another enormous cheque for householders who can’t pay the bills, but it is still possible that the political pressure might, in time, become too great for them not to act.

A Treasury source said a bailout for homeowners would be “self-defeating” because it would push up inflation and prompt the Bank of England to raise interest rates.

The Sunday Times reported that the Treasury has ruled out mortgage support because of this and other factors.

Instead, the Treasury will ask banks to do more to stop people losing their homes, it said.

Pressure on people struggling with mortgages could increase again on Thursday, with some analysts predicting the Bank will raise interest rates for the thirteenth time in a row.

David Husbands, 43, a property valuer from Chester-le-Street in County Durham, said his rising mortgage payments are “crippling” him.

His payments have gone from about £300 per month in early 2022 to more than £600.

“Because interest rates have gone sky high I’m lucky if I’m left with £100 to live off at the end of each month,” he said. “I’ve had to take on extra casual work elsewhere.”

He is finding the situation “exhausting” and “very stressful”, finishing work at 5:30pm, then doing gigs as a casual DJ until midnight.

He fell into negative equity in the financial crash in 2008, and doesn’t have enough money to renovate the house to sell it to “at least break even”.

David and his husband have also put adoption plans on hold.

“Right now we don’t feel confident to be able to give a child a secure, safe and comfortable home,” he said.

The idea of the government providing help for mortgage customers is more nuanced than the furlough jobs scheme or recent Energy Price Guarantee.

While those were universal, less than 30% of UK households have a mortgage.

Providing support for them risks alienating older voters who own their homes outright, and younger people who cannot even afford to buy.

That is why the government is not entirely ruling out some kind of support for homeowners, but sticking to its key pledge to bring inflation down to below 5%.

In theory that would ease everyday costs for every household.

However, ministers are desperate to get the economy firing, and if millions of people soon have to pay hundreds of pounds a month extra in their mortgage costs, that is money which they won’t spend on eating out, buying goods, or holidaying.

With a growing number of mortgage customers now getting into arrears, and repossessions increasing sharply in recent months, it is a worrying time for millions of households, with no easy answers.

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