Last October, the then-chair of the Conservative party, Jake Berry, declared the solution to rising energy prices was simple: “People know that when their bills arrive, they can either cut their consumption or they can … go out there and get that new job.” This week, Mr Berry disclosed his worries about rising mortgage bills, or what he termed “the mortgage bomb about to go off”, and called on the government to spend many millions in public money to bail out distressed households.
Two soaring bills and one Tory MP with two diametrically opposed answers: what could possibly account for the difference?
In fairness to Mr Berry, he is hardly the only Conservative alarmed at rocketing mortgage rates, and one doesn’t need Sherlock Holmes to divine why. The politicians most inclined to cite budgetary calculations as the reason for denying hungry children free meals in school holidays are doing hard electoral maths on what it means when 2.4 million households roll off their fixed-rate mortgages just in time for a general election.
For at least a century, Conservatives have seen home ownership as their way into the electorate’s collective heart. In the 1920s, Noel Skelton coined the term “property-owning democracy”. Six decades later, Margaret Thatcher called for “popular capitalism”. Then came George Osborne’s help-to-buy scheme, which quite possibly won the Tories the 2015 election.
In 2020, Mr Osborne’s protege Rishi Sunak declared a stamp duty holiday. The voters who went into the housing market or up the property ladder under these schemes will be the ones most under pressure now. As the Institute for Fiscal Studies points out, those most at risk are in their 30s and live in London and the south-east. They have the biggest home loans coming up for renewal.
For many of these households, a political giveaway to secure a couple of extra points in the polls will become a financial takeaway causing huge personal stress. Conservative aides may curse the Bank of England governor, Andrew Bailey, as the man who could lose them the next election, but a better culprit is now sitting inside No 10.
One person’s mortgage is another’s rent, and there are plenty of reports of tenants seeing their monthly outgoings rise as their landlords struggle with higher bills. That is one reason why it would be unfair for the government to introduce another version of mortgage relief, as Mr Berry is suggesting – because it would be taxing renters to subsidise landlords.
Owning an asset should not be a precondition for getting public money. Despite its longstanding promises, this government is yet to ban no-fault evictions, and its proposed upgrade of tenants’ rights leaves a lot to be desired. As the impact of higher rates is felt in the property market (the Office for Budget Responsibility projects a 10% fall in house prices), the government should work up a package of measures that mitigates the likely turbulence, and that protects private tenants as well as others.
For now, however, the best course is to demand that lenders show mortgage holders maximum forbearance, allowing them to change the term, or pay only the interest, on their loans for a while. These are among proposals made this week by Rachel Reeves, the shadow chancellor, stealing a march on her opposite number, Jeremy Hunt, who meets the mortgage industry on Friday.
The mortgage market is far more regulated than it was in the early 1990s. Let us hope that it is regulated enough. We shall soon find out. But one lesson from this latest crisis is surely clear: running a country’s economics and politics on the basis of keeping a property bubble inflated is a guaranteed recipe for disaster.
