“These measures should offer comfort to those who are anxious about high interest rates”
Last week, around 85% of lenders operating in the UK’s mortgage market signed a government Mortgage Charter agreeing to support borrowers, following a meeting with the Chancellor to discuss the impact of rising mortgage rates on homeowners.
The Charter includes allowing borrowers to contact their lender for help, without impacting their credit file and enabling borrowers who are up to date with payments to switch to a new mortgage when their fixed term ends, without another affordability check. The ability to switch takes effect from 10 July and will be available six months before a borrower’s fixed term period expires.
Lenders will also help borrowers to plan for when their rate ends and offer support to those struggling financially. This may include extending their mortgage term to reduce payments, switching to interest-only, or temporarily deferring payments.
Chancellor Jeremy Hunt said the measures “should offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty. As we have consistently shown through the pandemic, and the consequences of the war in Ukraine, we will always be on the side of households.”
Small Q1 growth for UK
The UK economy grew by 0.1% in the first quarter, according to data released by the Office for National Statistics (ONS) on Friday. The small GDP boost helped the UK steer clear of recession but left output 0.5% lower than it was in the final quarter of 2019.
Separately, figures released by the Bank of England (BoE) on Friday showed that households withdrew £4.6bn net from banks and building societies in May, the highest level of withdrawals since the BoE started collecting this monthly data in 1997. As inflation and cost-of-living pressures put the squeeze on household budgets, more people are dipping into savings to sustain living standards or to pay off mortgages or loans.
Central bankers not backing down
Leaders of the world's top central banks met last Wednesday in Sintra, Portugal, to discuss the prospect of further policy tightening to tame high inflation. At the end of the meeting, the bankers reaffirmed their belief that inflation can be lowered without triggering outright recessions.
Significant interventions came from US Federal Reserve Chairman Jerome Powell, who kept open the possibility of consecutive interest rate hikes. Likewise, European Central Bank President Christine Lagarde seemed to confirm the expectation of a ninth consecutive rise in eurozone rates in July.
BoE Governor Andrew Bailey, meanwhile, said he would do what is needed to bring down persistent price growth in the UK. Markets currently predict the BoE will increase Bank Rate from 5% to 6.25% by the end of this year, to which Mr Bailey commented, “They've got a number of further increases priced in for us. My response to that would be, well, we'll see.”
Bank of Japan Governor Kazuo Ueda remains an outlier, though even he seemed to open the door to one day abandoning the country’s ultra-easy policy.
UK-EU collaboration agreed
After years of post-Brexit disagreements, the UK has signed a pact with the EU to increase co-operation on financial services. The deal will include establishing a new forum where representatives can meet twice a year to discuss financial regulation and standards. A published memorandum stated, ‘Both sides will share information, work together towards meeting joint challenges and co-ordinate positions.’
New NHS plan revealed
On Friday, the government revealed its latest workforce plan for the National Health Service (NHS), with a promise to train more doctors and nurses, and create thousands of new roles to work alongside them. Proposals include doubling the number of university places for medical students, introducing a new apprenticeship scheme for doctors and shortening medical degrees.
The launch of the new plan follows revelations last Thursday that staff sickness in the NHS in England reached record levels in 2022, with the NHS losing the equivalent of nearly 75,000 staff to illness.
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All details are correct at time of writing (5 July 2023)