Rishi Sunak has been warned that falling mortgage rates will not boost his electoral hopes as 1.3million households face higher payments before the general election.
The PM had hoped a better economic outlook and falling rates would provide a boost in time for an autumn election, saying “2024 is going to be a better year”.
But House of Commons research, commissioned by the Lib Dems and seen by The Independent, reveals 1.3 million fixed-rate mortgage deals will expire before Britons go to the polls for an election expected in October.
And, after the PM was accused of “bottling” a May contest, the figures showed an additional 600,000 families will face mortgage hikes before the election.
Economists, mortgage brokers and pollsters have now warned the PM that voters heading to the polls will decide based on “how they feel in their pockets, not what the stats say about the economy”.
And they have said that while it is positive mortgage rates are falling, voters can only expect to be made “slightly less poor than they would have”.
At the beginning of 2022, an average two-year fixed-rate mortgage carried 2.38 per cent interest.
At the beginning of this year, that had risen to 5.93 per cent, meaning monthly repayments would be £395 higher, according to data from Moneyfacts.
While that is £116 less than the payments homeowners would have faced when mortgage rates spiked after Liz Truss’s mini-budget, it could still add close to £5,000 to a household’s annual bills.
For the same household renewing a five-year deal, they would still face a £291 monthly increase.
Pollster Luke Tryl, UK director at More in Common, told The Independent the “key point” is that the public decide their vote on how they feel, not “what the stats say about the economy, inflation or interest rates”.
“The reality for most people isn’t that they’ll be paying less, but instead they still be paying more and seeing a bigger part of their pay package going on mortgage and other interest payments,” he said.
Mr Tryl added: “Saying to people ‘but you could have been paying even more’ isn’t a very compelling electoral argument.”
And the Liberal Democrats, who commissioned the House of Commons research, said it showed more households face “mortgage misery” the longer Mr Sunak waits to call an election.
The Institute of Fiscal Studies said that while those re-mortgaging now will get a better deal than a few weeks ago, “they will still face a sharp hike in costs when rolling off a fixed rate”.
Senior research economist David Sturrock told The Independent: “That’s because the interest rates they face are still well above those two to five years ago.”
He said monthly repayments based on interest rates of 5 per cent would be £119 less than at 6 per cent, but still £221 more than the 3 per cent interest rates typically seen two years ago.
Simon Pittaway, Senior Economist at the Resolution Foundation, told The Independent that mortgage rates spiked during Trussonomics under Mr Sunak’s predecessor. They peaked last year amid a slew of Bank of England interest rate hikes.
And Mr Pittaway said that while mortgage rates falling is good news, “households having to re-mortgage this year should be under no illusions that they’ll be getting a cheaper deal”.
Labour piled on the pressure over rising mortgage bills
