How to avert a mortgage car-crash

How real is the ‘mortgage crisis’ and what, if anything, can be done to relieve it? BBC vox pops of borrowers whose monthly costs have already rocketed or who face imminent rate resets at 6 per cent or worse certainly give a dramatic impression. But in reality this is a slow-motion car-crash – for Rishi Sunak as well as the afflicted – in which some 1.4 million mortgages (out of a UK total of 13.2 million) will move to higher rates sometime this year and another million next year.

Forgive my arithmetic, by the way, but that looks like 18 per cent of the mortgage-holding population who constitute 28 per cent of all households, so just one in 20 households overall. And that compares with one in five households who live in rented accommodation, whose rents have risen by 10 per cent in the past year, who do not have the long-term consolation and security of bricks-and-mortar ownership, and who seem to be attracting rather less sympathy than about-to-be-squeezed borrowers in the current wave of media emotion.

So let’s keep this ‘crisis’ in proportion. But in a post-pandemic era when governments are expected to shield citizens from all forms of pain, what next? A reintroduction of mortgage interest tax relief – abolished by Gordon Brown in 2000 as a middle-class perk – could cost the Treasury many billions and would have to be matched by an equivalent benefit for renters. A pause in Bank of England rate rises purely to make life easier for borrowers would be a nonsense, the opposite of what rate rises are for and a mockery of central bank independence; rates would then have to stay higher for longer if they were ever to have the desired effect of quelling inflation.

No, the only thing ministers can do is try to hasten inflation’s fall by talking wage hikes down, easing labour shortages and supply blockages, and praying the pound will strengthen as rates rise, to make imports cheaper.