The chancellor has ruled out mortgage bill support for fear it would increase inflation.
Answering questions in the House of Commons, Jeremy Hunt told MPs that “schemes which involve injecting large amounts of cash into the economy, right now will be inflationary”.
Despite expressing sympathy for people with higher mortgage costs he said, “we won’t do anything that would mean we prolong inflation“.
He had been asked by Tory MPs about reintroducing a “bold Conservative idea” of mortgage interest relief at source, otherwise known as Miras, a 1980s policy that gave mortgage holders tax relief on their interest payments.
Both Mr Hunt and the economic secretary to the Treasury, Andrew Griffith, said such a policy introduction would worsen inflation.
Instead, Mr Hunt said he would meet the main mortgage lenders later this week, to ask them what help and flexibility they can offer to those struggling with expensive mortgages and householders in arrears.
The answers echo statements from Prime Minister Rishi Sunak and from Treasury sources who said the government goal of halving inflation would be derailed by financial supports for mortgage bills.
Mortgage payments have been consistently rising, particularly since May, when the consumer price index method of assessing inflation did not come down as far as expected and core inflation – the rate of price rises excluding the volatile food and energy sectors – increased to a 30-year-high.
As a result, it’s expected interest rates will be even higher than previously thought, as the Bank of England hikes its base interest rate to bring inflation down to 2%. The next likely rise will be made on Thursday.
Mortgage providers are already pricing in that increase in the rates they’re offering and on Monday the interest rate on the average two-year deal rose to 6.01%.
Price caps on food were also ruled out by Mr Hunt in the Commons on Tuesday, following the news that the rate of grocery inflation was 16.5% over the four weeks to 11 June.
“I don’t believe capping prices is the right long term solution”, he said, but added he will be meeting regulators next week, “to talk further about what needs to be done with respect to supermarkets”, he said.
