Britons face £5,000 a year rise on mortgages, as Labour extend huge poll lead

‘Devastating’ rise in costs will eclipse energy bill woes, say experts – but Sunak says ‘no alternative’ to current plan

Adam Forrest
Political Correspondent
Sunday 25 June 2023 13:40 BST
Government 'sticking to its guns', says Jeremy Hunt despite frozen inflation

Britain’s mortgage holders are facing a “devastating” spike in costs that will eclipse even the energy bills crisis, Rishi Sunak’s government has been warned.

Tory MPs are increasingly worried the mortgage timebomb will cost them their seats, as new research shows many in the “blue wall” south-east of England face a £5,000-a-year increase in payments.

It comes as Labour enjoys another surge in the opinion polls, with signs that Sir Keir Starmer’s party is enjoying a spike in support from anxious homeowners.

Research by the Public First consultancy shows those with average mortgages in London and the south-east could see their mortgage costs rise by £5,000 or more a year compared to 2020-21.

The findings, first shared with The Observer, also show that Britons under the age of 45 could see their annual costs increase by more than £4,000, since interest payments make up a larger proportion of their mortgage.

Public First’s Rachel Wolf, co-author the 2019 Tory manifesto, said: “The consequence of ever-rising house prices, particularly for squeezed millennials and those in the ever more expensive south-east, will be devastatingly clear in the next year.

She added: “With the end of low interest rates, the parts of middle Britain that aren’t yet retired will suffer in a way that for them will dwarf the energy bill crisis.”

Labour now holds a 31-point lead over the Tories among mortgage holders, according to a new Opinium poll for The Observer, rising from 44 per cent to 53 per cent.

While the Opinium survey showed a six-point swing to Labour, increasingly its lead to 18 points, the latest YouGov survey poll shows Labour taking a 25-point advantage after a six-point boost.

Rishi Sunak insisted ‘no alternative’ to government plan on Sunday (BBC)

James Johnson of JL Partners, former No 10 pollster, said it “confirms the Labour lead has extended significantly over the last ten days or so” – saying Rishi Sunak’s recent clashes with Boris Johnson, as well as the mortgage crisis, were key factors.

Mr Sunak used his interview with the BBC’s Sunday with Laura Kuenssberg to urge cash-strapped Britons to “hold our nerve” with interest rate hikes – claiming that was “no alternative” to his plan to stamp out inflation.

The PM said “inflation is the enemy” as he defended the Bank of England’s decision to raise interest rates to 15-year high of 5 per cent last week, piling pressure on mortgage-holders.

Offering support for beleaguered Bank governor Andrew Bailey, he said: “The Bank of England’s track record – including the governor’s track record – over a long period of time is that inflation has been managed appropriate … The Bank of England has my total support.”

But the Conservative party chairman Sir Jake Berry said Mr Bailey may have to go if does not come up an alternative course to putting up interest rates.

The senior Tory is the first to publicly question the governor’s future. He told GB News that “maybe it’s time to look for someone else who’s got a better plan” – accusing him failing in his job because he is pursuing Treasury “blobonomics”.

Jeremy Hunt has said ‘painful’ interest rate hikes are needed to curb inflation (PA Wire)

Chancellor Jeremy Hunt has urged cash-strapped Britons to be “patient” with “painful” interest rate rises – stressed that the hikes were “one of the most effective methods” to squash stubborn inflation.

Mr Hunt agreed a plan with banks to offer more flexibility over interest-only mortgage holidays, a 12-month repossession grace period and a guarantee that credit scores will not be impacted by switching to temporary support.

But senior Tory MPs also urged the government to go further – telling The Independent that many “panicking” backbenchers fear that the mortgage crisis will lead to a general election wipe-out.

One said the government would have to offer more help in the months ahead, suggesting “more generous” loans to cover mortgage interest payments for Universal Credit recipients. “What do we do for people who lose their job? We need to be more helpful,” they said.

Labour leader Keir Starmer is enjoying extended poll lead (PA Wire)

Writing in the Mail on Sunday, the chancellor said “we must hold our never”, making clear that the government is “absolutely committed” to supporting the Bank of England takes the “necessary steps” to curb inflation.

He said other countries are facing the same issues, “so ignore the predictable calls from those blaming Brexit”. Food industry have said the extra red tape created by Brexit have contributed to a rise in food prices in the UK.

Former PM Liz Truss is said to have revived her reputation somewhat among some MPs amid the gloom which has followed rate rises. She told guests at a summer drinks event last week: “I think I am the only Conservative left in Britain.”

Some senior Tory figures are “revising” their views on Ms Truss, according to the Sunday Times. A Truss ally the newspaper: “The car was on its way to driving off the cliff and she tried to do a handbrake turn.”

The central bank this week issued its 13th interest rate hike in a row, this time by half a percentage point from 4.5 per cent to 5 per cent in the sharpest increase since February.

The move was an attempt to reduce inflation, which measures the rate of rising prices, which remained at 8.7 per cent in May despite efforts to tame it – leaving mortgage-holders bracing for a big jump in their monthly repayments.

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