Mortgage rate rises could spark 'spiral of repossessions', Lib Dem leader fears

16 June 2023 , 16:21

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Sir Ed Davey fears for homeowners (Image: PA)

Home repossessions are set to soar further after mortgage rates nudged 6% yesterday.

The average two-year fixed-rate deal rose from 5.92% to 5.98% yesterday, with five-year deals up from 5.56% to 5.62%, Moneyfacts data shows.

Repayments were already taking up the biggest slice of new borrowers’ income in 15 years, at 20.4%, according to banking trade body UK Finance – and rates have continued to rocket since then.

The Lib Dems called for a £3billion emergency mortgage protection fund, paid for by reversing tax cuts for banks. Leader Sir Ed Davey said: “We’ve already seen repossessions surging by 50% in the latest quarter, and my worry is that we could be in a spiral of repossessions.”

Number of repossessed homes coming onto the market could soar (In Pictures via Getty Images)

The Bank of England could hike the base rate again next Thursday, from 4.5% to 4.75% – with 5% “not out of the question”, said Oxford Economics.

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The average borrower taking out a new mortgage next year faces a £2,900 surge in annual repayments, the Resolution Foundation think-tank said.

Graham Hiscott