Homeowners are being hit with a “Tory mortgage penalty” of £7,000 a year with interest rates triple what they were two years ago, according to Labour.
Pat McFadden, shadow chief secretary to the Treasury, blamed what he called the “reckless economic gamble” taken by the Conservatives during September’s mini-budget when Liz Truss was prime minister.
Truss became the shortest-serving British prime minister, lasting 45 days in office, after the fallout from her and then-chancellor Kwasi Kwarteng’s “growth plan”, which sent the value of the pound plummeting and mortgage rates soaring.
Analysis by Labour suggests the average homeowner who renewed their mortgage since what officials called the “kamikaze mini-budget” in the autumn is now spending an extra £150 every week.
It means the average household is paying £223 a week in mortgage interest payments – an increase of £7,000 a year, party officials said.
An estimated 1.4 million people are due to renew their fixed-rate mortgages by the end of this year.
Labour said those with a 75% loan-to-value ratio mortgage faced average interest rates of up to 4.63% in April.
The party said the same deal had an interest rate of 1.49% in April 2021 – a third of what it increased to 24 months later.
“Britain’s homeowners continue to suffer thanks to the Tories’ reckless economic gamble,” McFadden said.
“This Tory mortgage penalty has increased the cost of home ownership by thousands of pounds a year, causing huge worry for families, while putting the prospect of owning a home further out of reach for many others.
“Rishi Sunak might want to forget the economic misery the Conservatives have inflicted, but the public can’t forget about it as their outgoings soar.
“Labour will make our economy stronger and more secure, and stop working people paying the price for 13 years of Tory failure.”
Financial information website Moneyfacts said it had seen several mortgage providers raising rates last week while some mortgage lenders temporarily pulled some products from the market.
On Thursday, HSBC announced it had temporarily withdrawn mortgage deals for new borrowers due to a rise in demand in advance of expected rate rises.
The bank said it would remove all its “new business” residential and buy-to-let products, with deals becoming available again on Monday.
It is the first time that HSBC, which accounts for almost a quarter of the home loans market, withdrew from the mortgage market since the aftermath of September’s disastrous mini-budget.
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Nationwide, Britain’s biggest building society, said it needed to increase fixed rates to ensure they remain sustainable.
On Thursday, the average two-year fixed-rate mortgage rate on the market across all deposit brackets was 5.82%, according to Moneyfacts’ figures, up from 5.49% at the start of June.
The average five-year fixed-rate mortgage on the market on Thursday was 5.49%, up from 5.17% on 1 June.
In a response, the Conservative party did not reference Labour’s mortgage rate criticisms but instead focused on the opposition party’s decision to backtrack on a £28bn green prosperity plan.
The shadow chancellor, Rachel Reeves, on Friday said drastic changes to the economic backdrop over the past two years mean the party’s full spending pledge should be delayed.
A Conservative spokesperson said: “Labour proved once again this week why they can never be trusted with our economy.
“Their economic credibility is in tatters after Rachel Reeves finally admitted Labour’s borrowing spree would fuel inflation and send interest rates spiralling.
“The truth is Labour would have to resort to unlimited borrowing and hiking up taxes to fund their plans, hitting hardworking British people’s wallets.
“The Conservatives are getting on with the job of halving inflation, growing the economy, and reducing debt.”
