"Signalling that rate cuts are on the horizon is not enough. We've been hearing that since March. Homeowners' best-laid financial plans are on hold as they bear the brunt of the Bank of England's monetary experiment. We cannot see any justification for this continuing"
- Paula Higgins - HomeOwners Alliance
With inflation now nearly at the 2% target and after years of punishingly high interest rates, the HomeOwners Alliance is urging the Bank of England to "stop holding homeowners to ransom and cut interest rates now."
The hikes in the cost of borrowing is putting household finances under enormous strain. If you’re remortgaging, the best rate on a 2-year fix this June is 4.82% - this rate is more than double the best rate on a 2-year fix that was available in June 2022 which was 2.34%.
For someone with a £250,000 mortgage over 25 years this means a monthly mortgage payment of £1,435 compared to £1,102. This is an eye-watering increase of £333 per month or £3,996 a year.
Many households have found these increases impossible to afford: UK Finance figures show 870 homes were repossessed in the first quarter of 2024 – a 36% jump compared to the previous quarter. At the same time, 96,580 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance, during the same period - a 3% increase on the previous quarter.
The Bank of England has repeatedly argued that interest rates needed to increase or remain at 5.25% to fight inflation. They’ve raised rates 14 times since December 2021 to bring down inflation which went from 5.4% in December 2021 to 11.1% in October 2022 and has now dropped back to 2.3%. This is just a fraction over the target of 2%.
Commenting on reports that the Bank of England may opt to hold interest rates, Paula Higgins, Chief Executive of the HomeOwners Alliance, said: "Inflation is no longer running at 10% - it’s almost at its 2% target. And yet the Bank of England continues to use it as an excuse to keep interest rates at the current 16-year high. We think it's unacceptable that homeowners are held ransom by the Bank of England in this way.
"Signalling that rate cuts are on the horizon is not enough. We've been hearing that since March. Homeowners' best-laid financial plans are on hold as they bear the brunt of the Bank of England's monetary experiment. We cannot see any justification for this continuing.
"The burden is too heavily borne by mortgage borrowers. This is why we're calling on the Bank of England to stop this attack on homeowners and drop the base rate this Thursday."
