Mortgage holders could get more help from Government if home repossessions start to go up

Mortgage holders could get more help from the Government if there are signs that home repossessions could increase amid rising interest rates.

With the Bank of England set to increase the base rate again on Thursday, homeowners renewing their mortgages could be in line for bruising increases in repayments.

The current base rate of five per cent has already resulted in mortgage costs surging to 15-year highs.

Treasury sources told i Chancellor Jeremy Hunt is open to looking again at what banks and lenders could be asked to do to ease the financial strain on families.

In June, the Treasury introduced a “mortgage charter” which set out standards lenders are asked to follow when helping their customers.

Banks signed up to the charter will offer borrowers increased flexibility to manage their mortgage payments over a short period. It was introduced in anticipation of a possible rise in repossessions.

With the number of repossessions still low at the moment, Mr Hunt it not poised to take further measures unless it appeared that the charter was not having the desired impact but sources he was not ruling anything in or out.

“Let’s see if the mortgage charter is sufficient – we don’t know yet because repossessions and arrears are below pre-pandemic levels, which themselves are close to historic lows,” the source said.

They said there are currently “no signs of distress in the market at the moment” and that the charter was designed to act as a “safety net” in face people get into trouble.

“If there is signs of distress in the market in the future, we’ll see if the current mortgage charger is sufficient,” the source added.

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Most economists expect the Bank’s Monetary Policy Committee (MPC) to lift the base rate by 0.25 percentage points on Thursday, taking it to 5.25 per cent. The last time it stood this high was in March 2008.

There are concerns that mortgage pains are yet to be felt, with many households still protected by fixed term rates.

And this latest interest rate increase would increase pressure on borrowers facing hundreds of pounds extra added onto their monthly repayments.

Rishi Sunak said on Wednesday that inflation is not falling as fast as he would like, but that people can “see light at the end of the tunnel”.

After hearing from an LBC caller about their mortgage situation, Mr Sunak said: “It’s inflation that’s causing everyone problems with their bills, it’s inflation which means the Bank of England is having to put up interest rates.

“And the quicker we get inflation down, the quicker we can ease some of these pressures, and that’s why you’ve got to trust me, you’ve seen me do it during the pandemic, I know how to manage the economy for everyone, I will bring inflation down, I will make the decisions that are necessary – which are not easy – but you can trust me to do that on your behalf and everyone else’s.

“Because the quicker we bring inflation down, the quicker we can start bringing interest rates down and ease that pressure for homeowners like you.”