Chancellor Jeremy Hunt has ruled out providing financial support for struggling mortgage borrowers as rates hit new highs.
Average mortgage rates hit 6.07% for a two-year fix yesterday and 5.72% for five years, according to Moneyfacts data, as lenders reprice deals ahead of an expected rise in the cost of borrowing this week.
Hunt was asked in Parliament yesterday by Conservative MP Sir Jake Berry if the Government would consider reintroducing mortgage interest relief for borrowers.
But Hunt said support schemes that involve injecting large amounts of cash into the economy would be inflationary.
He said: "As much as we sympathise with the difficulties and do everything we can to help people seeing their mortgage costs go up, we won't do anything that would mean we prolong inflation."
It comes as a senior mortgage broker has suggested 25-year fixed rate mortgages could help shake-up traditional lender offerings as Housing Secretary Michael Gove acknowledge these types of products could help address rising home loan costs.
Gove told the Daily Telegraph that it has become “more difficult to have access to mortgage finance” and suggested longer-term fixed deals could be the answer.
He said: “One of the things that is right for levelling up over all is making sure we can develop the types of products that are elsewhere in the world.
“Particularly countries like Canada – which are long-term, fixed-rate mortgages, so you don’t get the oscillation of how much you pay every two or five years, but you have certainty over as long as 25 years on what you pay.”
Commenting on the idea, Nicholas Mendes, mortgage technical manager for broker John Charcol, said the interest rates associated with these deals have historically been too high to be attractive to borrowers.
But he added: “As we head into a period of average five-year or less fixed rates starting with a 5% or 6%, this makes longer term fixed rates considerably more desirable.
“Moving forward, as we see new lenders coming onto the market such as Perenna, and other fintech lenders with new funding models and longer-term fixed rates this will no doubt disrupt the traditional lenders product offering, as we face a new era joining our European and US counterparts in taking up longer term deals.”