Chancellor's mortgage plan might mitigate against chaos - but it will not prevent the pain
Upping interest rates is a blunt tool designed to take money out of people's pockets to suck demand out of the economy and bring inflation down. But often economics and politics are uneasy bedfellows. Less than 18 months from an election, voters are being asked to take on a lot of pain.
Friday 23 June 2023 13:34, UK
There was never going to be an announcement on Friday about direct "bailout" style funding for those struggling with their mortgages.
Both the government and Labour agree that would risk fuelling inflation further.
Politics latest: Chancellor announces new measures for mortgage holders
So what we have instead is a beefing up of existing tools available to lenders and a reintroduction of some of the easements seen during the pandemic.
The difficulty may be that the sheer depth and length of this mortgage squeeze will likely still leave many wanting more from both the banks and the government.
For example, the measures to protect credit scores are only for those who change their mortgage products for less than six months.
Does anyone realistically think the situation will be considerably better in half a year?
And how easy in practice will it be for borrowers to gain approval to alter deals to lower their monthly repayments?
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It's also worth remembering that moving to interest-only or extending a term will ultimately increase the total amount someone pays over the life of the mortgage.
Likewise, with interest rates forecast to stay high for several years, a 12-month pause on repossessions is welcome news for now - but in the long term, could it just postpone the inevitable for many?
With mortgage rates heavily influencing rents there's also the question of what happens to those who don't own their home and the ballooning costs they have been dealing with in an increasingly overheating rental market.
The reason this is all sounds so grisly is because that's partly the point.
Upping interest rates is a somewhat blunt tool designed to take money out of people's pockets to suck demand out of the economy and bring inflation down.
But often economics and politics are uneasy bedfellows.
Less than 18 months from an election, voters are being asked to take on a lot of pain.