Tory mortgage penalty costs UK homeowners extra £7,000 annually

Labour has accused the Conservative Party of causing a “Tory mortgage penalty” of £7,000 for homeowners, with interest rates now three times higher than they were two years ago. Pat McFadden, shadow chief secretary to the Treasury, pointed to the “reckless economic gamble” taken by Liz Truss and Kwasi Kwarteng during their time in power as the cause of the increase.

According to Labour’s analysis, the average homeowner is now spending an additional £150 every week since the mini-budget in September, which led to the pound’s value dropping and mortgage rates skyrocketing. Mortgage interest payments now typically amount to £223 a week, an increase of £7,000 a year.

Labour’s findings revealed that those with a 75% loan-to-value mortgage faced average rates of up to 4.63% in April. In comparison, the same mortgage deal had an interest rate of 1.49% in April 2021, two-thirds less.

Pat McFadden stated, “Britain’s homeowners continue to suffer thanks to the Tories’ reckless economic gamble. This Tory mortgage penalty has increased the cost of home ownership by thousands of pounds a year, causing huge worry for families, while putting the prospect of owning a home further out of reach for many others.”

In response, the Conservative Party did not address Labour’s mortgage rate criticisms but instead focused on the opposition’s decision to backtrack on a £28bn green prosperity plan. A Tory spokesman said, “Labour proved once again this week why they can never be trusted with our economy. Their economic credibility is in tatters after Rachel Reeves finally admitted Labour’s borrowing spree would fuel inflation and send interest rates spiralling.”

Labour’s research coincides with some mortgage lenders temporarily withdrawing products from the market last week. HSBC UK stated that it had temporarily removed some products to “stay within operational capacity.” Nationwide Building Society, Britain’s largest building society, said it needed to increase fixed rates to ensure they remain sustainable.

As of Thursday, the average two-year fixed-rate mortgage rate on the market across all deposit brackets was 5.82%, according to Moneyfacts figures, up from 5.49% at the start of June. The average five-year fixed-rate mortgage on the market on Thursday was 5.49%, up from 5.17% at the beginning of the month.