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Mortgage Charter
26 June 2023
Lead MP
Jeremy Hunt
Debate Type
Ministerial Statement
Tags
EconomyEnergy
Other Contributors: 37
At a Glance
Jeremy Hunt raised concerns about mortgage charter in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
Mr Speaker, last week the Bank of England increased interest rates to 5%, amid ongoing efforts to combat high inflation. The Government is committed to supporting families through a £94 billion support package, averaging £3,300 per household. Despite this commitment, higher interest rates cause anxiety among many families. The minister met mortgage lenders to agree on new support measures for those struggling with mortgage payments without undermining the Bank of England’s monetary objectives. A mortgage charter was signed by 85% of UK market leaders, offering two key supports: reducing monthly payments via switching to an interest-only or extended-term mortgage, and providing flexibility in changing mortgage deals up to six months before current ones expire. For those at risk of losing their home due to arrears, a minimum 12-month period without consent for repossession is guaranteed if they seek lender advice. The aim is to provide comfort amidst rising interest rates and support extreme financial difficulties. Tackling inflation remains the Prime Minister’s top priority.
Rachel Reeves
Lab
Leeds West
Question
What are the consequences for firms who have not signed up to this scheme? Where is the plan for renters affected by higher mortgage costs of their landlords? Why aren't savers benefiting from rising interest rates as much as mortgage holders are suffering?
Minister reply
While specific details were not provided, the minister emphasised flexibility in mortgage adjustments and support without immediate credit score impacts. He did not address consequences for non-participating lenders or renters' plans directly but reiterated commitment to tackling inflation through responsible measures.
Rachel Reeves
Lab
Leeds West and Pudsey
Question
Thank you, Mr Speaker. I would like to thank the Chancellor for advance sight of his statement this afternoon. Families are worried sick about mortgage costs increasing by £2,900 on average this year amidst a cost of living crisis. The Resolution Foundation estimates that millions of households will have to pay a combined total of £15.8 billion more in mortgage payments annually by 2026. Labour's measures would provide real help for those affected, but the Government’s voluntary set of measures is not good enough. I ask the Chancellor about consequences for firms who do not sign up to this scheme, his plan for renters, why savers are not enjoying benefits from rising interest rates, and whether he thinks getting rid of house building targets will increase home ownership.
Minister reply
I will deal with specific points first: Labour opposed intervention power in the Financial Services and Markets Bill that would have made mandatory measures possible. The Government secured more protection for people who miss payments not just six but 12 months. I urge her to listen to experts such as Paul Johnson of the Institute for Fiscal Studies, who warns about the inflationary impact of additional borrowing.
Question
Given that we do not want too much pressure on mortgage holders, will the Government launch a series of supply-side measures to increase the supply of things that are short and promote home-grown food and energy?
Minister reply
As my right hon. Friend is correct, the Budget was focused on labour supply measures such as reducing childcare costs by up to 60% for families with young children. My Chief Secretary to the Treasury is launching a productivity review.
Question
Given that base rate drives mortgage rates, and core inflation higher in many countries, should we now not revert to forward guidance on base rates from the Bank of England?
Minister reply
Forward guidance is a matter for the Governor. I disagree with reviewing the target for inflation as it remains an important commitment.
Desmond Swayne
Con
New Forest West
Question
Given the significant tightening in monetary growth measures, is the Chancellor absolutely sure that the Bank of England has got it right?
Minister reply
The Governor himself acknowledges issues with inflation forecasting and conducts an independent review to see how this process can be improved.
Angela Eagle
Lab
Wallasey
Question
Some 8,600 families in Wallasey face increases in mortgage bills of up to £1,800 annually. The banks are very slow to pass on interest rate rises to savers while quickly passing them to borrowers, making the mechanism less effective. Did he notice that banks made more than £4 billion extra on the differential between these rates?
Minister reply
The right hon. Lady is absolutely correct about issues with increases in interest rates being passed on too slowly to savers, particularly with instant access accounts. I am working on a solution as it needs resolving.
Bill Wiggin
Con
North Wootton
Question
My right hon. Friend will know that increasing liquidity in the housing market will give homeowners more options and choices. Will he look at reducing the burden of stamp duty to help both current and future homeowners?
Minister reply
I thank my hon. Friend for his comment. The level of stamp duty is, as with all taxation measures, kept under review. We make decisions at the time of fiscal events, whether autumn statements or spring Budgets, and we will continue to do that.
Sarah Olney
Lib Dem
Richmond Park
Question
The root cause of soaring interest rates—other than the shambles of the mini-Budget—is the Government’s failure to control inflation. The Prime Minister took personal responsibility for halving inflation this year. Will the Chancellor explain why the Government are refusing to take obvious steps to tackle inflation such as reinstating energy support for farmers and businesses, cutting import costs for small businesses and bringing down the NHS waiting list to alleviate the squeeze on our workforce?
Minister reply
I find it strange that the hon. Member should be criticising the Government’s failure to tackle inflation when her party is suggesting a multi-billion-pound package of mortgage support that would increase inflation. I must say that the Liberal Democrats are positioning themselves brilliantly as the pro-inflation party.
Mark Pritchard
Con
The Wrekin
Question
I welcome the new mortgage charter, but may I say, along with all Members across the House, that constituents are suffering and that they are very concerned? Many are having to choose between food, clothes and shoes and paying the mortgage or the rent, and decisions that we make here, either as the governing party or cross-party, are having a direct impact on individuals’ lives every single day. I join cross-party with the hon. Member for Wallasey (Dame Angela Eagle), who is absolutely right that, so often, when the base rate rises, lenders are quick to raise those interest rates on our constituents. Will my right hon. Friend ensure that when interest rates fall, as they surely will—hopefully they will soon; possibly in the autumn, but we will see—those reductions are passed on to our constituents as quickly as possible?
Minister reply
My right hon. Friend is right to draw attention to the human consequences of any economic shock. I am extremely proud that, under the Government since 2010, 1.7 million people have been lifted out of absolute poverty, including 400,000 children. That is why in the autumn statement we prioritised those facing the biggest challenges with a £94 billion package of support to help people through the cost of living crisis. But one thing that can definitely happen better than it is now is passing on increases in the base rate to savers.
Stephen Doughty
Lab Co-op
Cardiff South and Penarth
Question
One reason nearly 10,000 of my constituents will be hit by the Tory mortgage bombshell is that many deals ending in this 12-month period were taken out when interest rates were below 2%; they are now at 5%. Will the Chancellor set out clearly his private analysis of the likely rises in arrears and repossessions over the next few months?
Minister reply
I do not have any private forecasts that I have not shared with the House. What I can say is that about 0.9% of families with mortgages are currently in arrears, and that is nearly four times fewer than in 2009.
Question
I thank the Chancellor for his statement. A third of my constituents have mortgages and will welcome this range of measures. Now that the majority of the mortgage market is fixed, not floating, does he agree that rising short-term interest rates will not necessarily result in falling inflation and that we need to look at other measures such as making sure that interest rate increases are passed on to savers so that they keep their money in the bank?
Minister reply
My hon. Friend is absolutely right. Notwithstanding the fact that 85% of mortgages are now fixed to some degree, an extra 1.2 million families will feel the increase in interest rates over the months between now and the end of the year. That will be felt by many families, but we should do everything in our power to tackle inflation, because in the end that is the only way to end the misery for so many people.
Richard Burgon
Lab
Leeds East
Question
Many of the banks that the Chancellor has been talking about are raking in bumper profits by refusing to pass on higher interest rates to their savers. Surely, a windfall tax on those additional profits would allow the Government to provide mortgage holders with the kind of support they really need at this time. Before the Chancellor dismisses that idea, may I gently remind him that even Margaret Thatcher imposed such a windfall tax on banks’ excess profits?
Minister reply
I hear what the hon. Gentleman says, but he will be pleased to know that banks already pay a 3% surcharge on their corporation tax—they pay 3% more than everyone else—as well as a levy on their balance sheets.
Question
I welcome the action that the Chancellor has taken on this issue. Increasing the flexibility of mortgage terms and conditions will provide welcome relief to homeowners who are struggling with anxiety at the present time. The mortgage charter sounds great. What obligations has he insisted on with the mortgage companies to get that information out to mortgage holders to inform them of the extra flexibility available?
Minister reply
My hon. Friend makes a good point. All lenders had some of those measures to a lesser or greater extent. What is significant about Friday is that they aligned their offer so that it is much easier to communicate to all families with mortgages. The charter has been agreed by 85% of the market, so a very large majority of mortgage lenders are agreeing to a simple set of terms that they will all follow so that it is easy for people to understand their rights.
Stella Creasy
Lab Co-op
Walthamstow
Question
The people watching this who have too much month at the end of their money need better and straight answers from the Chancellor. He has ducked the question about whether he thinks the Government will reach their own target to halve inflation, and he needs to be honest about what he thinks the consequences will be of only reaching an inflation target of 5%. I join colleagues across the House who have raised concerns about the fact that the vast majority of mortgages are fixed. People facing the possibility of eviction even in a year’s time will be sick with worry. What assessment has he made of the impact if inflation only gets down to 5%? When will he learn the lessons from the energy companies, and not wait to hold the banks responsible for their role in all this?
Minister reply
I have a lot of respect for the hon. Lady, but she is being a little churlish about what the Government have done. I have not waited; I called in the banks and the lenders on Friday, and I got them to commit to a set of terms that will make life easier for 85% of families with mortgages if their mortgage comes up for renewal. On the Government’s target to halve inflation, both the Bank of England and the International Monetary Fund have said that we are on track.
David Simmonds
Con
Ruislip, Northwood and Pinner
Question
I have never forgotten the anxiety caused to my parents in the late 1980s, after they bought their current home and interest rates soared. Does my right hon. Friend agree that the package of measures that he has announced will help enormously to alleviate the anxiety that many households are feeling, without allowing rampant inflation to put my constituents’ dreams of home ownership even further out of reach?
Minister reply
I thank my hon. Friend for a thoughtful question. The measures agreed by the banks and principal lenders on Friday will make a big difference, particularly for people who are genuinely in arrears, who now know that their house will not be forcibly repossessed for 12 months. That is an important reassurance, and gives people longer to get their finances in order. It also encourages people who are worried about the impact on their credit score that the simple fact of having a conversation if they are in distress will not have any impact on it. For people in a similar situation to his parents, this is an important set of measures.
Brendan O'Hara
SNP
Argyll, Bute and South Lochaber
Question
In his statement, the Chancellor said that there will be a minimum 12-month period from the first missed payment before a repossession without consent. Does that come into effect from today, or will it apply retrospectively? What will that mean for hard-pressed families who, because of soaring costs, missed August but managed to pay September, October, November and December, and missed January? At what point does the clock start ticking on their repossession?
Minister reply
The agreement will take effect in the next few weeks, but the context of the agreement with the banks and lenders is one where they are agreeing to do everything they possibly can to give people longer to get their affairs in order so that repossessions are reduced or eliminated altogether. I think it will be a positive step forward.
Question
I listened very carefully to the shadow Chancellor, because I want to hear serious ideas. The public are not daft; they can see there are incredible pressures across the world. But not only is Labour not coming up with ideas, it is breaking its own economic pledges. It made me think of the latest Labour councillor to step down, who said recently that she watched Keir Starmer’s leadership with increasing concern and frustration because of a “lack of policy” to help those most affected by the cost of living. Does my right hon. Friend agree with me? Will he say more about how we can keep working with lenders—so it is not just a one-off conversation—to create solutions to help with some of the problems ahead of us?
Minister reply
I am happy to give my hon. Friend that reassurance. I will continue to talk not only to the lenders but the regulators, who I am meeting later this week, to see if there are any areas at all where price reductions that should be passed on to consumers are not being passed on. I hope to update the House further.
Debbie Abrahams
Lab
Oldham East and Saddleworth
Question
Asks why the Chancellor will not put the mortgage charter in statutory form, given that Labour opposed mandatory powers for the charter and the voluntary codes have limited impact.
Minister reply
The Financial Conduct Authority will monitor compliance with the mortgage charter. The minister emphasises that the Charter was made possible due to a lack of opposition from Labour.
Question
Asks if the mortgage charter will assist those in shared ownership schemes.
Minister reply
Absolutely confirms that the mortgage charter will support individuals with shared ownership arrangements.
Dwyfor Meirionnydd
Question
Questions whether the Chancellor will follow Plaid Cymru's lead and implement direct protections for mortgage holders hardest hit by interest rate increases.
Minister reply
Commits to doing everything possible to assist those in difficulties, but not measures that are inflationary.
Question
Praises the Chancellor's approach of tackling inflation without increasing it and asks for encouragement to banks to pass on interest rates to savers.
Minister reply
Agrees that encouraging saving is technically counter-inflationary and should be encouraged.
Tan Dhesi
Lab
Slough
Question
Questions why UK residents are paying more in annual premiums compared to other EU countries.
Minister reply
Responds by stating that 14 EU countries have higher core inflation, and points out similar interest rate rises elsewhere.
Question
Welcomes the new mortgage charter but questions what message should be sent to those not currently round the table.
Minister reply
Commits to signing up remaining lenders who have not subscribed to the charter. Emphasises that signatories will offer more competitive mortgages.
Justin Madders
Lab
Ellesmere Port and Bromborough
Question
Asks if the current mortgage market is fundamentally different from previous crises, questioning whether this tool is merely hammering a group of people rather than tackling inflation.
Minister reply
Agrees that the mortgage market has changed but believes interest rates are still effective for tackling inflation.
Question
Asks about conversations with companies providing other forms of consumer credit and debt advice charities regarding rising interest rates.
Minister reply
States ongoing conversations with those involved in relieving families from debt arrears, but emphasises cost of living support provided by the Government.
Paula Barker
Lab
Liverpool Wavertree
Question
Questions why UK has been hit harder than other countries and requests an explanation on 'absolute poverty' versus poverty.
Minister reply
Points out that 400,000 more children and 200,000 more pensioners have been lifted out of absolute poverty. Also mentions international factors affecting inflation.
Toby Perkins
Lab
Chesterfield
Question
Asks why Chesterfield residents are paying more in mortgage increases compared to other countries like France and Germany.
Minister reply
Responds by stating that core inflation is higher in over half the EU countries.
Bill Esterson
Lab
Sefton Central
Question
Continues questioning why UK residents are paying more compared to other countries and criticises 13 years of Conservative leadership.
Minister reply
Reiterates that core inflation is higher in over half the EU countries.
Question
Asks about action on tackling cost of living crisis, including raising incomes and addressing bank profiteering.
Minister reply
States concern for those worried about mortgage repayments but emphasises Government's generous cost of living payments.
Chris Stephens
SNP
Glasgow South West
Question
Citizens Advice Scotland reported that requests for advice from people who are homeless or at risk of homelessness reached their highest ever level in May this year and were up 30% from May 2022. What additional measures is the Chancellor planning to protect the most vulnerable households from the impact of soaring interest rates on their mortgage repayments?
Minister reply
Families on means-tested payments will receive a payment of £900, pensioner families will get a payment of £300 and families with someone who is disabled will get an extra payment of £150. Additionally, other measures are being implemented to address the issue.
Alex Cunningham
Lab Co-op
Stocksbridge Penistone
Question
Two constituents face a near tripling of their mortgage payments to over £2,600 a month. What does the Chancellor have to say to my constituents who are impacted by soaring interest rates? Why do they have to pick up the bill for Government incompetence?
Minister reply
We are taking difficult decisions to deal with inflation in this country as other countries are doing. Addressing inflation is necessary to prevent more families from experiencing similar difficulties.
Helen Morgan
Lib Dem
North Shropshire
Question
I have constituents whose mortgages were with Northern Rock when it collapsed back in 2008 and are now trapped paying variable rates. Is there any help for mortgage prisoners in the measures that the Chancellor has announced today?
Minister reply
The issue is complex, but I will write to her with details of what we are thinking in this area.
Rachael Maskell
Lab Co-op
York Central
Question
Private rents go up when mortgages go up, yet local housing allowance disparity is growing faster in places like York than anywhere else in the country. What process has the Chancellor set in train to review local housing allowance and the broader rental market?
Minister reply
The hon. Lady is right to talk about the impact on renters due to high prevalence of buy-to-let landlords and the pass-through effect. We are looking at this issue in great detail, and I will write to her with details.
Martin Docherty
SNP
West Dunbartonshire
Question
Why does the Chancellor not know about the assistance he is able to give to mortgage prisoners, as mentioned in his statement?
Minister reply
The issue is complex. I will write to the hon. Member for North Shropshire and also to him if he is saying that we are doing nothing to help people who are struggling or worrying about mortgage repayments.
Carmarthen East and Dinefwr
Question
What fiscal measures is the Chancellor considering to help younger generations and address intergenerational financial unfairness in the UK?
Minister reply
The biggest measure in the spring Budget was the childcare measure that will mean families with young children can get up to £6,500 of help with their childcare costs to help them go back to work.
Jim Shannon
DUP
Strangford
Question
I thank the Chancellor for his statement and welcome the move to ensure a minimum of 12 months from the first missed payment in case of repossession. Can he confirm whether it will be 12 months from any first missed payment or 12 months from a specific time? How will the Chancellor ensure that his goal is not circumvented by banks?
Minister reply
Banks are required by the FCA to offer tailored solutions based on individual circumstances to prevent such issues from occurring.
Shadow Comment
Rachel Reeves
Shadow Comment
Families are facing an average increase of £2,900 in mortgage costs this year, exacerbated by a cost-of-living crisis. The Chancellor's measures do not address immediate financial pressures, with many families having to cancel holidays and deplete savings. Labour proposed mandatory lender actions to support struggling customers, whereas the Government’s voluntary measures cover only 85% of the market, leaving over 1 million families without assistance. Questions raised include consequences for non-participating lenders, plans for renters affected by higher mortgage costs, why savers aren’t benefiting as much from rising interest rates, and how halving inflation aligns with current economic challenges. The shadow criticises the Government's record on energy bills doubling, food inflation reaching near 20%, and house ownership targets being dropped.
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