Rishi Sunak has ruled out extra help for UK homeowners struggling to pay soaring mortgage costs, as the average two-year fixed-rate loan rose above 6%.
The prime minister said the government should “stick to the plan” to halve inflation in its attempts to tackle the cost of living crisis.
Mortgage rates have soared in recent weeks as the Bank of England’s attempts to cut stubbornly high inflation have fed through into lending deals.
The average rate on a two-year fixed-rate mortgage rose to 6.01% on Monday – the highest since 1 December – from 5.98% on Friday. The average five-year deal rose to 5.67% from 5.62%.
The government has faced calls to help homeowners as more than 2.4m fixed-rate deals are due to expire by the end of 2024, leaving households with the prospect of a sharp increase in rates before the next election.
Speaking on ITV’s Good Morning Britain, Sunak said: “I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people.
“We’ve got a clear plan to do that, it is delivering, we need to stick to the plan. But there is also support available for people. We have the mortgage guarantee scheme for first-time buyers and we have the support for mortgage interest scheme which is there to help people as well.”
UK inflation is 8.7%, well above the Bank of England’s 2% target.
The Bank is expected to increase interest rates for the 13th time in a row on Thursday, putting a greater squeeze on mortgage-holders during a cost of living crisis in which the price of everything from energy to food has increased sharply.
Economists polled by Refinitiv predict the Bank’s monetary policy committee will raise interest rates by 0.25 percentage points to 4.75%.
On Sunday, the cabinet minister Michael Gove had raised hopes that the Treasury may intervene to help homeowners, saying help for mortgage-holders was being kept “under review”. However, Sunak’s comments suggest no extra help is planned.
Keir Starmer has also refused to pledge extra specific support for mortgage holders should the party gain power.
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Asked whether Labour would offer support, he said his party would tighten up the windfall tax on oil and gas companies to yield more money to help reduce energy bills. “That wouldn’t be a direct mortgage payment, but it would help people with their bills,” he told Sky News.
The average two-year fixed rate on a buy-to-let mortgage increased from 6.21% on Friday to 6.30% today, Moneyfacts said. The number of buy-to-let mortgage products on the market has fallen, to 2,515 on Monday from 2,589 on Friday.
Separately, Rightmove said on Monday that rising mortgage rates had brought forward the usual summer slowdown in the housing market.
Asking prices for British homes fell in June for the first time in six years, according to the property website.
Average new seller asking prices slipped by £82 this month to £372,812 – the first monthly drop in new asking prices this year, and the first at this time of year since 2017. Against last year, prices were up 1.1%.
Riz Malik, the founder and director of broker R3 Mortgages, said: “We urgently need a cross-party mortgage taskforce to find potential solutions to this ticking timebomb. This should [comprise] economists, lenders and other stakeholders who are actively involved in the mortgage market. We need action or the impending financial earthquake is going to send shock waves across the country.”
