Money expert Martin Lewis explains the mortgage crisis

Money expert Martin Lewis explains the mortgage crisis

Mortgage rate rise Who will feel the most pain

This is another very substantial hit for people with mortgages. Those on variable rate mortgages
will see them going up by between 25 and 30 quid a month per £100,000 of outstanding mortgage.
And of course then you have the huge bill shock that’s going to come for anybody coming off a
cheap fixed rate and the price is going to go up. Now what we have to do is look at this in no
uncertain terms and say this isn’t accidental. I mean this is why the Bank of England has put
up interest rates. It does that in order to squeeze people’s disposable income so that
money is taken out of the economy to try and bring inflation down. And that’s exactly what this does.
One of the problems with it though is it is only targeting a very narrow group of people.
In broad brush numbers a third of the country rent, a third of the country have mortgages and
a third of the country own outright. So what you’re trying to do is squeeze incomes but you’re having
to squeeze substantially a small number of people. There is of course a substantial indirect impact
on those who rent as well and they’re hurting not just because of the knock-on effect of their
landlord’s mortgages but also in those cases energy and food prices tend to be a big part of
disposable incomes too so they’re hurting as well. So I mean this is a very painful move by the Bank
of England. And for those people in the most pain following this move is there anything they can do?
Well I mean if you’re really struggling to not be able to pay your bills you need to talk to your lender
and there are measures out there you could extend your term, you could move to interest only, you can
take a payment holiday. There’s no guarantee your lender will allow you to do those things
but those are the type of forbearance deals that are available. For many people though
we’re now over the stress test limit. If you remember when you got a remortgage
or when you got your mortgage they would have looked at whether you could afford a deal at three
or four percent more than the interest rates. We’re now at or beyond that limit for many people
so they will be at the brink of their budgets but it will still just about be in the realms of
affordability if they cut back on everything and that’s what this policy is intending for people to
do. It’s intending to try and get people to spend less money so ultimately it’s very difficult to
look at the help measures that are out there for those people who are just seeing substantial
lifestyle curtailment. Once you go into the point where you’re looking at arrears, defaults or
repossession that’s the point that we need to make sure people are getting help. Because so far today
for example we’ve had Labour say they do have a plan for you know helping people who are increasingly
finding it difficult to pay their mortgage but of course they’re not in government. So far we haven’t
heard much from the government about what they might be willing to do on this. Of course it’s
my deep frustration that I raised the alarm on this in October last year and I said we were heading
for a mortgage ticking time bomb. That time bomb has now exploded and I think they took their foot
off the gas when rates didn’t rise as high as they could have done in April and that’s the problem.
We had the discussions then and in fact many of the plans for forbearance that Labour have come
out with today are very similar to the plans I was proposing back then and similar to the plans
the Chancellor was agreeing with back then but we never got them put in action because I think
people thought well it’s not as bad as it’s not as bad as it could have been. Well it is that bad
now. I really don’t give a monkeys who makes it happen we just need to make sure somebody makes
it happen. Martin Lewis thanks very much for speaking to us today. Cheers.

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