Chancellor Jeremy Hunt announced that the banks have agreed to wait at least 12 months before repossessing the homes of borrowers who fall behind on payments as Britain grapples with a looming mortgage crisis.
Traders now expect UK interest rates to peak at 6.25 per cent, the highest level since 1998, with stubbornly high inflation stoking bets on further tightening. The Bank of England’s Monetary Policy Committee voted to increase rates by 0.5 percentage points to 5 per cent, leading to big jumps in monthly mortgage repayments for borrowers on variable rates or needing to refresh fixed-rate deals.
Pantheon Economics forecast that house prices would fall 10 per cent peak-to trough, after previously anticipating an 8 per cent fall, adding: “We expect the downturn to be drawn out, with prices not reaching a floor until the beginning of 2024.”
Repossessions are still at a relatively low level, but many experts are worried about the consequences of the recent rise in borrowing costs.
“The last thing that [lenders] want to do is repossess a home, but in that extreme situation they have agreed there will be a minimum 12-month period before there’s a repossession without consent,” Hunt said after meeting bank executives in Downing Street.