With inflation now nearly at the 2% target and after years of high interest rates, Homeowners Alliance have urged the Bank of England to “stop holding homeowners to ransom and cut interest rates now”.
The hikes in the cost of borrowing is putting household finances under enormous strain, they have said. If you’re remortgaging, the best rate on a two year fix this June is 4.82% – this rate is more than double the best rate on a two year fix that was available in June 2022 which was 2.34%.
For someone with a £250,000 mortgage over 25 years this means a monthly mortgage payment of £1,435 compared to £1,102. This is an increase of £333 per month or £3,996 a year.
Many households have found these increases impossible to afford. UK Finance figures show 870 homes were repossessed in the first quarter of 2024 – a 36% jump compared to the previous quarter. While 96,580 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance, during the same period – a 3% increase on the previous quarter.
The Bank of England has argued that interest rates needed to increase or remain at 5.25% to fight inflation – raising rates 14 times since December 2021 to bring down inflation which went from 5.4% December 2021 to 11.1% in October 2022 and has now dropped back to 2.3%. Commenting on reports that the Bank of England may opt to hold interest rates, Paula Higgins, Chief Executive of the HomeOwners Alliance, said:
“Inflation is no longer running at 10% – it’s almost at its 2% target. And yet the Bank of England continues to use it as an excuse to keep interest rates at the current 16 year high. We think it’s unacceptable that homeowners are held ransom by the Bank of England in this way.
Signalling that rate cuts are on the horizon is not enough. We’ve been hearing that since March. Homeowners’ best-laid financial plans are on hold as they bear the brunt of the Bank of England’s monetary experiment. We cannot see any justification for this continuing.
The burden is too heavily borne by mortgage borrowers. This is why we’re calling on the Bank of England to stop this attack on homeowners and drop the base rate this Thursday.”
One Response
The Bank of England made a mistake by not raising rates gently and slowing and instead lumping us with huge hikes at the same time. They are compounding their errors by keeping interest rates high unnecessarily. There is no question that interest rates will not be allowed to fall to the record lows we had, they should be around 3-3.5%. However, there needs to be a realisation that if interest rates drop and it saves a family £100, that is £100 that can be spent in the economy or even to try and invest into people’s savings and pensions. Savings and pensions have taken a massive hit and unless people can start building them back up again, we’re going to have even more issues in retirement than we are having now. The Bank of England has behaved quite poorly and they are not helping the economy get back on it’s feet.