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Mortgages: the end of buy-to-let for many landlords?

The Behavioural Finance Forum is asking how the buy-to-let market can sustain itself after the latest hike in interest rates? There are reports that many buy-to-let landlords will pull out of their properties leaving the rental and wider housing market in disarray.

Today, the BBC is reporting that banks and building societies are meeting the Chancellor Jeremy Hunt to discuss the upheaval following the shock decision by the Bank of England to hike rates to 5% from 4.5% as it tries to curb high inflation. It reported:

'The government and lenders are under pressure to do more to help those struggling with rising mortgage rates. But Mr Hunt and Prime Minister Rishi Sunak have so far dismissed suggestions of the government stepping in.'

After the interest rate rise was announced, Mr Sunak said the government would remain "steadfast and stick to its plan" to bring down inflation.

Friday's meeting at Downing Street, which UK Finance said had been billed as a "collaborative event", will see major lenders meet Mr Hunt, who has resisted calls for direct government intervention.

The chancellor said support such as tax relief risked stoking inflation, which figures released on Wednesday showed that were stuck at 8.7% in May.

Instead discussions are likely to focus on strengthening existing help for those facing difficulties. Some of the options suggested have been:

  • Providing more flexibility for homeowners if they ask for changes to existing deals

  • Boosting support for mortgage interest payments for those on benefits

  • Allowing people temporary respite from payments without impacting their future ability to borrow

Some urged more aggressive action - the National Residential Landlords Association (NRLA) called for the reintroduction of mortgage interest relief and the unfreezing of housing benefit rates.

The Guardian has also been reporting the recent reluctance of Rishi Sunak to provide extra help for UK homeowners struggling to pay soaring mortgage costs:

'The prime minister said the government should “stick to the plan” to halve inflation in its attempts to tackle the cost of living crisis, despite growing pressure on the Conservatives as households across the country face a surge in borrowing costs.

'Mortgage rates have soared in recent weeks as the Bank of England’s attempts to cut stubbornly high inflation have fed through into lending deals. City investors widely expect the central bank to announce its 13th consecutive rate increase on Thursday this week in response to persistently high inflation....

'TSB became the latest high street bank on Monday to pull their cheapest mortgage deals, as high street lenders reacted to the prospect of higher Bank of England base rates by pushing up the cost of new home loans to the highest levels since the 2008 financial crisis.'


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