Keir Starmer has said he would not support subsidising mortgage holders to spare them the pain of rising interest rates, as the Bank of England pushed its base rate up by 0.5 percentage points to 5%.
The Labour leadersaid there were “problems” with the approach advocated by some, including the Liberal Democrat leader, Ed Davey, who has called for a £3bn support scheme to help vulnerable borrowers.
Starmer said Labour, were it in power, would tell financial regulators to force banks to offer mortgage holders more flexibility with their repayments – an approach that would require no additional spending.
He told the Times CEO Summit: “There’s no answer to this that doesn’t go with economic stability.”
Speaking later, after the Bank announced its rate rise, Starmer told Times Radio: “If there is one issue keeping people awake at night it is paying the bills, so this is really, really bad news for so many families.
“I think, of course, there’s no quick fix. We’ve got to be honest about that. There is inflation across the world, there are global factors. But this country always gets hit hardest, whether it’s mortgage rates, interest rates, energy prices, food prices.”
Experts say repeated interest rate rises have left the UK facing a “mortgage timebomb”, with borrowers on fixed-rate deals only feeling the effect when those terms expire.
Jeremy Hunt, the chancellor, will meet big banks on Friday to discuss what flexibility they can show to homeowners who fall behind on their payments.
Some Tory MPs are calling for tax relief to be granted on interest repayments as a way to ease the pressure on borrowers. But ministers say they do not want to intervene in the mortgage market, not least because doing so could fuel inflation and undermine the point of the interest rate increases.
The Lib Dems have called for a temporary relief package that would offer grants of up to £300 a month for anyone whose repayments rise by more than 10% of their household income. The party said the scheme would cost £3bn, which it said could be funded by reversing cuts to bank taxes that the government announced last year.
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Labour says it wants the Financial Conduct Authority to force banks to offer greater flexibility for borrowers, including by allowing people to move on to interest-only mortgages and delaying repossession proceedings. The party’s approach reflects concern among shadow ministers that they should avoid promising anything that opponents could claim would require a tax rise to fund.
Rachel Reeves, the shadow chancellor, told the BBC’s Today programme: “I recognise the challenge of inflation, and a big fiscal injection of cash into the economy, especially an untargeted injection, would not be the right approach.”
Gavin Barwell, the former Tory MP and chief of staff to Theresa May, responded to Reeves’ comments on Twitter, saying: “Sure sign an opposition thinks it is going to win is when its leaders reject populist policies that would only make things worse in the medium term.”
