Falling mortgage rates will not boost Tory election hopes, Rishi Sunak warned

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Rishi Sunak has been warned that falling mortgage rates will not boost his electoral hopes as 1.3million households face larger funds earlier than the overall election.

The PM had hoped a higher financial outlook and falling rates would offer a boost in time for an autumn election, saying “2024 is going to be a better year”.

But House of Commons analysis, seen by The Independent, reveals 1.3 million fixed-rate mortgage offers will expire earlier than Britons go to the polls for an election anticipated in October.

And, after the PM was accused of “bottling” a May contest, the figures confirmed a further 600,000 households will face mortgage hikes earlier than the election.

Economists, mortgage brokers and pollsters have now warned the PM that voters heading to the polls will resolve based mostly on “how they feel in their pockets, not what the stats say about the economy”.

And they’ve mentioned that whereas it’s constructive mortgage rates are falling, voters can solely count on to be made “slightly less poor than they would have”.

At the start of 2022, an common two-year fixed-rate mortgage carried 2.38 per cent curiosity.

At the start of this 12 months, that had risen to five.93 per cent, that means month-to-month repayments can be £395 larger, in keeping with information from Moneyfacts.

While that’s £116 lower than the funds householders would have confronted when mortgage rates spiked after Liz Truss’s mini-budget, it may nonetheless add near £5,000 to a family’s annual payments.

For the identical family renewing a five-year deal, they’d nonetheless face a £291 month-to-month enhance.

Pollster Luke Tryl, UK director at More in Common, advised The Independent the “key point” is that the general public resolve their vote on how they really 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 mentioned.

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 analysis, mentioned it confirmed extra households face “mortgage misery” the longer Mr Sunak waits to name an election.

The Institute of Fiscal Studies mentioned that whereas these re-mortgaging now will get a greater deal than a number of weeks in the past, “they will still face a sharp hike in costs when rolling off a fixed rate”.

Senior analysis economist David Sturrock advised The Independent: “That’s because the interest rates they face are still well above those two to five years ago.”

He mentioned month-to-month repayments based mostly on curiosity rates of 5 per cent can be £119 lower than at 6 per cent, however nonetheless £221 greater than the three per cent curiosity rates sometimes seen two years in the past.

Simon Pittaway, Senior Economist on the Resolution Foundation, advised The Independent that mortgage rates spiked throughout Trussonomics beneath Mr Sunak’s predecessor. They peaked final 12 months amid a slew of Bank of England rate of interest hikes.

And Mr Pittaway mentioned that whereas mortgage rates falling is nice information, “households having to re-mortgage this year should be under no illusions that they’ll be getting a cheaper deal”.

The New Economics Foundation suppose tank mentioned households renewing fixed-term mortgages this 12 months will nonetheless face “far higher” payments than they’d have been paying.

“Although mortgage rates are falling slightly, they are still much higher than they were for many years prior to the disastrous Truss mini-budget just over two years ago,” he mentioned.

Mr Sunak dominated out a spring vote and raised the prospect of a prolonged and bitter marketing campaign on Thursday when he confirmed it was his “working assumption” that he would name the election within the second half of the 12 months.

Conservative polling guru Robert Hayward advised The Independent that the PM was “wise” to attend within the hope of an financial revival.

The Tory peer thinks the “general perception” of the Tories may enhance due to the marginally rosier outlook for first-time patrons. “The longer you can put between the Truss period and the election the better for the government,” Lord Hayward mentioned.

The Tories would want a significant rebound to catch Labour within the polls, with Sir Keir’s social gathering commanding a 19-point lead. It is the most important lead a 12 months out from an election for any social gathering since Sir Tony Blair’s landslide 1997 win.

And mortgage dealer Lewis Shaw, of Shaw Financial Services, advised The Independent: “The notion that the electorate will celebrate with glee at being made slightly less poor than they would have is for the birds.

“That’s akin to only getting whipped twice a day rather than the normal three. The current government has directly and consciously contributed to the crisis millions of households are facing and the crisis millions are already in.”

Labour’s Shadow Chief Secretary to the Treasury, Darren Jones MP, mentioned: “Interest rates beginning to fall is good news but the 197,000 homeowners coming off fixed rate mortgages this month alone will still experience huge hikes in their monthly payments, which are typically set to increase by £240.”

Meanwhile Liberal Democrat Treasury spokesman Sarah Olney warned the longer Mr Sunak waits to call an election, the more families will face “mortgage misery”. “People are seeing their monthly mortgage payments go up by hundreds of pounds a month, while the government is bogged down in endless chaos and infighting,” she said.

Darryl Dhoffer of The Mortgage Expert said: “The Tories are trying to paint falling rates as a victory lap, but for many mortgage holders, it’s more like a sucker punch disguised as a glove tap.

“My clients who locked in at historically low rates three years ago are now staring at a doubling of their monthly payments. Falling rates won’t help them dodge that uppercut.”

Craig Fish, managing director of the brokerage Lodestone, advised The Independent: “People are actually, or quickly will be, paying greater than ever for his or her mortgages and day by day bills, leaving a bitter style that solely a change in authorities appears more likely to treatment.”

A Treasury spokesman mentioned: “Interest rates are high across the developed world as economies work to tackle high inflation and the UK is no different. But now inflation has halved, the economy is turning a corner – starting with tax cuts for 27 million people this month, saving the average earner £450 a year.

“We are also supporting households worth £3,700 between 2022 and 2025 and our Mortgage Charter can make it easier for people to manage monthly repayments and gives extra protections against repossessions.”