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| Mortgages: Banks promise to be flexible as mortgage rates soar | |
| (32 minutes later) | |
| Banks and building societies will offer more flexibility to struggling mortgage-holders as rates soar. | Banks and building societies will offer more flexibility to struggling mortgage-holders as rates soar. |
| The move comes after bank bosses met the chancellor, Jeremy Hunt, in Downing Street on Friday. | The move comes after bank bosses met the chancellor, Jeremy Hunt, in Downing Street on Friday. |
| Borrowers will be able to make a temporary change to their mortgage terms, then will be able to return to their original deal within six months. | Borrowers will be able to make a temporary change to their mortgage terms, then will be able to return to their original deal within six months. |
| This would allow some to have lower repayments for a short time, by just paying the interest on the home loan. | This would allow some to have lower repayments for a short time, by just paying the interest on the home loan. |
| Mr Hunt said the six-month flexibility on switching terms would not affect credit scores as it may have done previously. | Mr Hunt said the six-month flexibility on switching terms would not affect credit scores as it may have done previously. |
| However, it will still be the case that missing payments or taking a total break on payments, known as a mortgage holiday, will still harm someone's ability to borrow in the future. | However, it will still be the case that missing payments or taking a total break on payments, known as a mortgage holiday, will still harm someone's ability to borrow in the future. |
| Lenders also agreed to a 12-month delay before taking repossession proceedings against borrowers unable, or unwilling, to pay over the long term. | Lenders also agreed to a 12-month delay before taking repossession proceedings against borrowers unable, or unwilling, to pay over the long term. |
| Bank chief executives described it as a "productive" meeting as they left Downing Street. | Bank chief executives described it as a "productive" meeting as they left Downing Street. |
| Earlier this week, the Labour Party issued a five point plan which it said would ease what it called "the Tory mortgage penalty" and help limit repossessions. | Earlier this week, the Labour Party issued a five point plan which it said would ease what it called "the Tory mortgage penalty" and help limit repossessions. |
| Labour said the typical British household was paying £1,000 more in mortgage payments than neighbours in Germany, France, the Netherlands and Ireland. | Labour said the typical British household was paying £1,000 more in mortgage payments than neighbours in Germany, France, the Netherlands and Ireland. |
| Five ways to save money on your mortgage | Five ways to save money on your mortgage |
| How the interest rate rise affects you | How the interest rate rise affects you |
| The meeting between lenders and Mr Hunt comes after Thursday's shock decision by the Bank of England to raise interest rates to 5%, up from 4.5%, as it tries to tackle inflation. | The meeting between lenders and Mr Hunt comes after Thursday's shock decision by the Bank of England to raise interest rates to 5%, up from 4.5%, as it tries to tackle inflation. |
| Millions of UK households will see their budgets squeezed as a result. | Millions of UK households will see their budgets squeezed as a result. |
| Some, including the National Residential Landlords Association (NRLA), are calling for government action, such as the reintroduction of mortgage interest relief and the unfreezing of housing benefit rates. | Some, including the National Residential Landlords Association (NRLA), are calling for government action, such as the reintroduction of mortgage interest relief and the unfreezing of housing benefit rates. |
| The NRLA warned that interest rates of 5% could force landlords to sell 735,000 rental properties which it said would "exacerbate the ongoing supply and demand crisis across the private rented sector". | The NRLA warned that interest rates of 5% could force landlords to sell 735,000 rental properties which it said would "exacerbate the ongoing supply and demand crisis across the private rented sector". |
| But Mr Hunt and Prime Minister Rishi Sunak have dismissed suggestions that the government should step in, arguing providing support for borrowers could undermine the Bank of England's battle against inflation. Figures released on Wednesday showed remained stuck at 8.7% in May. | But Mr Hunt and Prime Minister Rishi Sunak have dismissed suggestions that the government should step in, arguing providing support for borrowers could undermine the Bank of England's battle against inflation. Figures released on Wednesday showed remained stuck at 8.7% in May. |
| After the interest rate rise was announced, Mr Sunak said the government would remain "steadfast and stick to its plan" to bring down inflation. | After the interest rate rise was announced, Mr Sunak said the government would remain "steadfast and stick to its plan" to bring down inflation. |
| If you can't see the calculator, click here. | If you can't see the calculator, click here. |
| Tim Pitt, a partner at the consulting firm Flint Global and a former Treasury adviser, said the chancellor should "hold his nerve". | Tim Pitt, a partner at the consulting firm Flint Global and a former Treasury adviser, said the chancellor should "hold his nerve". |
| "He needs to not make the Bank's job harder," he told the BBC's Today programme. | "He needs to not make the Bank's job harder," he told the BBC's Today programme. |
| Interest rate rises are partly aimed at dampening spending in the economy, by reducing people's disposable income. So providing general support for mortgage-holders would work counter to the Bank of England's policy. | Interest rate rises are partly aimed at dampening spending in the economy, by reducing people's disposable income. So providing general support for mortgage-holders would work counter to the Bank of England's policy. |
| Bank of England governor Andrew Bailey admitted on Thursday that the 13th consecutive rise in rates since December 2021 would cause "difficulty and pain" for many. Those with loans would be "understandably worried" he said. | Bank of England governor Andrew Bailey admitted on Thursday that the 13th consecutive rise in rates since December 2021 would cause "difficulty and pain" for many. Those with loans would be "understandably worried" he said. |
| Mortgage rates have been rising for months. An average two-year fixed rate mortgage is currently at 6.19%, while the five-year rate is 5.82%, according to financial data firm Moneyfacts. | Mortgage rates have been rising for months. An average two-year fixed rate mortgage is currently at 6.19%, while the five-year rate is 5.82%, according to financial data firm Moneyfacts. |
| The average two-year tracker mortgage rate rose to 5.66%, from 5.49% following Thursday's rate rise. | The average two-year tracker mortgage rate rose to 5.66%, from 5.49% following Thursday's rate rise. |
| In June last year those rates were closer to 3%. | In June last year those rates were closer to 3%. |
| The latest move by the Bank of England has yet to filter through into current mortgage rates, according to David Hollingworth from London and Country brokers. | The latest move by the Bank of England has yet to filter through into current mortgage rates, according to David Hollingworth from London and Country brokers. |
| "Fixed rates have not gone into overdrive, they're still moving rapidly but there's no acceleration. We'll see how the markets react in the coming days," he said. | "Fixed rates have not gone into overdrive, they're still moving rapidly but there's no acceleration. We'll see how the markets react in the coming days," he said. |
| Rising interest rates can also reduce spending in the economy by boosting the incentive to save money. | Rising interest rates can also reduce spending in the economy by boosting the incentive to save money. |
| The BBC understands some savings rates have already been put up following Thursday's rate rise. But in recent weeks, MPs have criticised banks for failing to pass rate rises on in full to savers with easy-access accounts. | The BBC understands some savings rates have already been put up following Thursday's rate rise. But in recent weeks, MPs have criticised banks for failing to pass rate rises on in full to savers with easy-access accounts. |
| Harriet Baldwin, chair of the Treasury Committee, told the Today programme that High Street banks had been "incredibly slow" in passing on rate rises. | Harriet Baldwin, chair of the Treasury Committee, told the Today programme that High Street banks had been "incredibly slow" in passing on rate rises. |
| She said that banks had "taken it for granted that we've got used to not earning anything on savings", adding that savers were "basically being taken advantage of at the moment". | She said that banks had "taken it for granted that we've got used to not earning anything on savings", adding that savers were "basically being taken advantage of at the moment". |
| What do I do if I can't afford to pay my debts? | What do I do if I can't afford to pay my debts? |
| It is important that you do talk about financial difficulties before finding yourself in a spiral of debt. The earlier, the better. | It is important that you do talk about financial difficulties before finding yourself in a spiral of debt. The earlier, the better. |
| If you think you cannot pay your debts or are finding dealing with them overwhelming, seek support straight away. You are not alone and there is help available. | If you think you cannot pay your debts or are finding dealing with them overwhelming, seek support straight away. You are not alone and there is help available. |
| A trained debt adviser can talk you through the options available. | A trained debt adviser can talk you through the options available. |
| What help and options are available to people struggling with debt repayments? | What help and options are available to people struggling with debt repayments? |
| How will the latest interest rate rise affect you? You can share your experiences by emailing haveyoursay@bbc.co.uk. | How will the latest interest rate rise affect you? You can share your experiences by emailing haveyoursay@bbc.co.uk. |
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| Related Topics | Related Topics |
| Inflation | Inflation |
| Bank of England | Bank of England |
| Mortgages | Mortgages |