Hunt rules out mortgage interest tax relief help
Chancellor Jeremy Hunt has ruled out providing large-scale assistance to mortgage payers, through tax relief on their mortgage payments.
Sir Jake Berry, Conservative MP for Rossendale and Darwen, tells MPs at Treasury Questions that people are very concerned about what is being called a “mortgage bomb that is about to go off”.
Q: Is it time to consider reintroducing a bold Conservative idea of mortgage interest relief at source. If we don’t help families now, all the other money we have spent to help them will be wasted if they lose their home.
Hunt replies that such schemes, involving injecting large amount of cash into the economy, would be inflationary.
He adds:
Much as we sympathise with the difficulties and will do everything we can to help people who are seeing their mortgages costs going up, we won’t do anything that would mean we prolong inflation.
Tory MP Jake Berry asks Jeremy Hunt to consider reintroducing tax breaks for mortgage interest. Chancellor rejects idea because it would “involve injecting large amounts of cash into the economy” and therefore stoke inflation.
— Hugo Gye (@HugoGye) June 20, 2023
Mortgage interest tax relief – effectively a tax break for home buyers – was introduced in 1983 to boost homeownership but scrapped in 2000.
Key events
Full story: Hunt to meet mortgage lenders later this week
Chancellor Jeremy Hunt has said he will meet lenders later this week to ask what help they can give to borrowers struggling with their mortgage, PA Media reports.
Mr Hunt told the House of Commons he would be asking what flexibilities might be possible for borrowers in arrears.
He said:
“We won’t hesitate in our resolve to support the Bank of England as it seeks to strangle inflation in the economy. The best policy is to stick to our plan to halve it.
“But I also want to make sure we do everything possible to help families paying higher mortgage rates in ways that do not themselves feed inflation.
“So later this week I’ll be meeting the principal mortgage lenders to ask what help they can give to people struggling to pay the more expensive mortgages and what flexibilities might be possible for families in arrears.”
It is understood that the meeting will take place on Friday.
Property portal Rightmove has also reported that mortgage rates continued to rise today.
The average two-year fixed-rate mortgage, at a 95% loan-to-value ratio, was 6.36% today, up from 6.22% a week ago, their data shows.
Rightmove’s mortgage expert Matt Smith says:
“Average rates continue to rise this week, and though they are now rising at a slower pace than last week, this is likely to come as little respite for those looking to take out a mortgage right now. Those who managed to secure a lower rate just weeks ago are likely to be doing all they can to accelerate their home purchase and use this lower rate in time.”
“Some buyers who can, may choose to wait and see what effect this week’s inflation news has on the mortgage market. This is likely to be more influential than the Base Rate decision in determining the direction of mortgage rates in the immediate term. The mortgage market has already factored in a Base Rate rise of up to 0.5%, so any increase on Thursday is unlikely to have a negative impact on mortgage rates.
“The number of people contacting estate agents about a home for sale is still higher than at this time in the last more normal housing market of 2019, meaning that right now, the data indicates that higher rates are not stopping many people from planning their move.”
The pound has dipped by half a cent today – another sign that investors may be less confident that interest rates will rise sharply.
Sterling has fallen to $1.2738 against the US dollar, away from the one-year high set on Friday.
Raffi Boyadjian, lead investment analyst at XM, says:
The pound is trading somewhat lower below $1.28 ahead of tomorrow’s UK CPI [inflation] data, which could determine the size of the rate increase from the Bank of England the following day.
Sterling is the best performing major currency so far this year but there’s a danger that markets have overpriced the scale of tightening that’s yet to come from the BoE.
Gwyn Topham
In the transport sector, National Express Group, the parent company of Britain’s venerable intercity coach service, has today changed its name to the more, er, international-sounding Mobico.
The London listed plc, which now runs services in North Africa and the Middle East as well as Europe and the US, will still keep the original brand for UK coaches, as well as other well-known brand names in its operations abroad.
However, the change reflects its growth worldwide – and perhaps its detachment from at least one sector in the UK, having abandoned its once-significant rail interests in Britain just before franchising blew up.
Announcing the plan last month, Ignacio Garat, chief executive of what is now Mobico, said the new name “better represents our multi-modal operations, global reach and future ambitions”.
…as does the shadow Chancellor:
Whilst the Tories squabble over parties and peerages mortgages are soaring up.
The average mortgage payment is going up by £2,900 this year.
Why won’t the Chancellor take responsibility for the harm caused by the Tory Mortgage penalty? pic.twitter.com/CHUzFxMB3U
— Rachel Reeves (@RachelReevesMP) June 20, 2023
The chancellor tweets….
The single most effective policy to help mortgage holders right now is to bear down on inflation. We won’t put that plan at risk.
This week, I will meet mortgage lenders to assess the state of the market and to see what flexibilities might be possible for those in arrears. https://t.co/3CaqKeCCOW
— Jeremy Hunt (@Jeremy_Hunt) June 20, 2023
Here’s my colleague Richard Partington on today’s calls to introduce mortgage interest tax relief:
Rightwing papers highlight how mortgage misery in 2023 can be blamed on actions taken a quarter of a century ago…
How Gordon Brown added £270 a year to your mortgage payments https://t.co/D2sfwXW717
— Richard Partington (@RJPartington) June 20, 2023
Would the government reintroduce Miras?
Asked today in parliament, Jeremy Hunt firmly says no.
“Those kind of schemes, which involve injecting large amounts of cash into the economy right now, would be inflationary”
— Richard Partington (@RJPartington) June 20, 2023
Signs of fresh Tory schism as Red Wall Conservatives push for reintroduction of Miras, calling it a “Tory principle”…
Treasury minister Andrew Griffith says it would be the “sort of unfunded spending commitments that we see on the benches opposite. It would be disastrous…”
— Richard Partington (@RJPartington) June 20, 2023
Gordon Brown announced the phasing out of Miras in his 1999 budget, arguing that homeowners had benefited from the drop in interest rates since the previous autumn.
Jeremy Hunt’s pledge to keep fighting inflation may be soothing nerves in the City.
UK government bond prices are rising in value, which has pushed down the interest rate (or yield) on the debt.
The yield on two-year government bonds has dropped to 4.94%, a day after hitting 15-year highs over 5%, lifted by fears over inflation and higher interest rates.
Hunt: I am proud of our economic record
Shadow chancellor Rachel Reeves tells MPs that mortgage rates are rising due to 13 years of economic mismanagement and the mini-budget last year, leaving to higher inflation in the UK.
Q: Average mortgage payments are going up by a crippling £2,900 this year – where does the chancellor think families are going to get the money to pay the Tory mortgage penalty?
Jeremy Hunt says the government announced £94bn support in the autumn budget.
He says Labour’s plans mean an extra £28bn of borrowing per year, at a time when experts say higher borrowing mean higher inflation, higher interest rates and higher mortgage rates.
Reeves tells the chancellor to stop passing the buck, and focus on the mortgage crisis.
She say 10,000 households in Uxbridge and South Ruislip will be paying £5,200 more on average this year (which may concentrate minds at the upcoming by-election).
Q: Will the chancellor apologise for the harm that his government have caused?
He will not. Hunt declares, to some chortles from opposition MPs, that:
I am proud of our economic record, which has seen our economy grow faster than France or Japan since 2010, and the same rate as Germany.
Mortgage holders will pay even more if a Labour government borrowed an extra £100bn in the next parliament, Hunt adds.
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