UK mortgage-holders pay thousands more than Europeans, Labour says
The Bank of England last week raised rates to a 15-year high in a shock move that piled pressure on mortgage-holders.
New analysis by Labour suggests that even before the latest hike, new mortgages cost a typical household over £2,000 more per year than in France.
For a £200,000 loan paid back over 25 years, annual UK mortgage payments are around £1,100 higher than in Belgium and Ireland, and about £800 more than in Germany and the Netherlands, the party said.
The analysis is based on Bank of England data which shows that effective interest rates on new mortgages in April were on average 4.46%.
European Central Bank figures show that equivalent interest rates were on average 2.91% in France, 3.61% in Belgium, and 3.89% in Germany.
Chancellor Jeremy Hunt last week agreed measures with banks aimed at cooling the mortgage crisis, including giving people struggling with repayments a 12-month grace period before repossessions begin.
Borrowers will be able to extend the term of their mortgages or move to an interest-only plan temporarily “no questions asked”, in a change that echoed Labour’s demands.
But Labour has criticised the voluntary nature of the measures, saying that around two million people could miss out on support because they are not mandatory.
The Opposition party has been urging ministers to compel banks to be more supportive.
Labour’s shadow chief secretary to the Treasury Pat McFadden said: “These figures lay bare the cost of the Tory mortgage penalty.
“Yet again the Tory Government’s refusal to step up and offer proper support is forcing families into a far worse financial situation than in neighbouring countries.
“The Government’s failure to make the measures announced on Friday mandatory means around 2 million households could miss out on the mortgage support they need.
“The Conservative Government can’t grip this problem because they are the problem. Their chaotic response to the devastating impact the Tory mortgage penalty is having shows they’re completely out of touch with the situation families are facing.
“Labour’s plan to ease the Tory mortgage penalty offers practical help now.”
Shadow communities secretary Lisa Nandy on Sunday argued the emphasis should be on tackling the housing crisis.
“There is no answer to this crisis without building more homes and that’s why exactly what Labour will do,” she told Sky.
A Tory former minister said his should be the party of homeownership which he said has “tragically” narrowed under Conservative governments.
Lord Willetts, president of the Resolution Foundation think tank, told BBC Radio 4’s Westminster Hour: “There is a group of several million people who could be seeing their mortgage costs rise by about £3,000 in a year and that is a lot for a middle-income household to bear. So it is going to be tough for them.
“And there is a wider point here. Conservatives believe in the property-owning democracy. We’ve seen tragically a narrowing of homeownership over the last decades. That in turn means that if you’re trying to use interest rates, mortgage rates to drive disinflation, you’ve got a smaller group to operate on and they feel more intense pain.”
A Conservative Party spokesperson said: “High inflation is the cause of mortgage hikes – and that’s why it’s the Government’s number one priority to halve it. And with central banks increasing interest rates around the world, the UK is not alone in the fight against inflation.
“We have acted quickly to support mortgage holders, protecting vulnerable families from repossession, protecting homeowner’s credit scores when they seek support and ensuring lenders are supporting their customers individually – Labour should try to keep up.”