Interest Rates

(asked on 21st June 2023) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the impact of relative changes in banks rates on (a) mortgages and loans and (b) savings.


Answered by
Andrew Griffith Portrait
Andrew Griffith
Minister of State (Department for Science, Innovation and Technology)
This question was answered on 26th June 2023

The Government does not set mortgage or interest rates. The Bank Rate - which is one factor that lenders use to set mortgage and retail interest rates - is set by the Monetary Policy Committee (MPC) of the Bank of England, which is independent of Government. Commercial Banks and Building Societies also make other commercial judgements that influence the degree of pass‐through from changes in Bank Rate into mortgage and retail interest rates. The Government does not seek to intervene in these commercial decisions.

However, we recognise this will be a concerning time for mortgage holders, particularly those who are due to come to the end of their existing deal in the immediate future. The Prime Minister has been clear, the best and most important way that we can keep costs and interest rates down for people is to halve inflation, and then return it to the 2% target.

The Chancellor and I have regular meetings with banks on a range of topics, including to discuss how banks are supporting people with the rising cost of living. On Friday 23 June the Chancellor met with mortgage lenders, UK Finance and the FCA to discuss a new package of support for those who encounter problems keeping up with their mortgage payments. These commitments include an agreement permitting customers to switch to an interest only mortgage, or extend their mortgage term, for 6 months, after which they can switch back without a new affordability check or it affecting their credit score. Lenders also agreed borrowers won’t have their home repossessed within 12 months from a first missed payment without their consent or unless in exceptional circumstances.

If you are concerned about making your mortgage repayment, you must speak to your lender as soon as possible. Contacting them will not affect your credit score.

The Government has also already taken a number of measures aimed at helping people to avoid repossession, including Support for Mortgage Interest (SMI) loans for those in receipt of an income-related benefit, and protection in the courts through the Pre-Action Protocol, which makes it clear that repossession must always be the last resort for lenders.

The retail savings market currently offers a range of competitive options to savers, who can now access the highest rates in recent years on a variety of instant access and fixed-term products. I would encourage savers to explore the full range of products available in the market to find the best rates.

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