THERE was quite the song and dance around the UK Government’s announcement last Friday of what it described as “support for people struggling with mortgage repayments”.

While we saw a raft of specific measures outlined, and some were not entirely without value, it was difficult indeed to disagree with Liberal Democrat Treasury spokesperson Sarah Olney’s summation of the package as a “sticking plaster for a gushing wound”.

Of course, the UK housing market and mortgage situation is dire and not at all easy to solve.

The Bank of England has raised UK base rates from a record low of 0.1% in December 2021 to 5%, and financial markets are pricing in further increases to around 6% this cycle.

Back in the days before the global financial crisis, a 6% base rate would have been entirely unremarkable.

However, we are now around a decade-and-a-half on from the financial crisis and, for the vast bulk of this period, base rates have been at rock-bottom levels.

From a societal perspective and in terms of intergenerational fairness, the effects of this have been lamentable. House prices have soared, leading to people having to take on much greater mortgages than they would have had to do in the past and dashing the hopes of many who wanted to own their home.

Furthermore, from an economic viewpoint, the protracted rock-bottom rates fuelled imbalances, which were very worrying anyway and have looked ever more alarming as benchmark borrowing costs have surged. From the perspective of long-term economic and housing market stability, it would surely have been better if base rates had remained in or close to the range they moved around in through the good times of the mid to late 1990s and the first eight-and-a-half years of the new millennium.

We are where we are though, unfortunately.

As base rates have surged, those on variable rate mortgages have been presented with immediate hikes in their monthly payments. And these increases will have been eye-watering for so many people, even those with relatively modest mortgages.

At the same time, there is the usual very sizeable churn of people coming off fixed-rate mortgages.

As recently as the early part of last year, while not ideal, this was not so much of a problem.

However, it has become much more difficult for people. Even before the bulk of the rise in base rates came through, financial market expectations of how high borrowing costs would go had hardened very significantly. Now base rates have risen to levels that many would have considered inconceivable at the time they started moving up in December 2021. And, of course, there are the expectations of further significant increases.

In a perfect world, base rates might have risen by much less than they have this cycle and moderately higher borrowing costs could possibly have borne down on house prices relatively gently over a protracted period, solving some of the dysfunction in the housing market.

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That is not how things have worked out, however.

The Bank of England’s Monetary Policy Committee has, as it has weighed the UK inflation situation, felt the need to raise base rates relentlessly, and has not signalled yet that it is done.

Annual UK consumer prices index inflation remained stuck at 8.7% in May, figures published last week revealed. This is the highest among the Group of Seven leading industrialised nations.

There is rightly debate over whether the Bank of England might be taking too aggressive an approach on interest rates, particularly given the specific nature of some of the UK’s inflation woes, including crucially the Brexit effect.

However, the fact of the matter is that people with mortgages will have to deal with the effects of the hike in interest rates, whether or not it has been the right course of action. Danny Blanchflower, who is Bruce V. Rauner ’78 professor of economics at Dartmouth College in the US and a visiting professor at the University of Glasgow, noted a few weeks ago that more than 100,000 households a month in the UK are coming off fixed-rate mortgage deals.

Chancellor Jeremy Hunt, announcing his mortgage measures last Friday, signalled an awareness of this issue.

He said: “There are two groups of people that we are particularly worried about. The first are people who are at real risk of losing their homes because they fall behind in their mortgage payments. And the second are people who are having to change their mortgage because their fixed rate comes to an end, and they’re worried about the impact on their family finances of higher mortgage rates.”

Mr Hunt went on to say that he had last Friday “agreed with the banks and the principal mortgage lenders and the Financial Conduct Authority three very important things”.

The first, he said, is that “absolutely anyone can talk to their bank or their mortgage lender and it will have no impact whatsoever on their credit score”.

While this will provide some reassurance, and might enable some homeowners to feel comfortable about speaking to their lenders before a situation spirals out of control, people could be forgiven for thinking it is not a “very important” thing.

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Skipping to the third “thing”, this was spelled out by Mr Hunt as follows: “For people who are at risk of losing their home in that extreme situation, the banks and mortgage lenders have a number of things in place. The last thing that they want to do [is] repossess a home, but in that extreme situation they have agreed there will be a minimum 12-month period before there’s a repossession without consent.”

Twelve months is obviously better than nothing but that is hardly going to make those who have found themselves in difficulty because of macroeconomic factors beyond their control sleep more soundly at night.

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So what about the second of the “three very important things”?

Mr Hunt set this out as follows: “If you are anxious about the impact on your family finances and you change your mortgage to interest only or you extend the term of your mortgage and you want to go back to your original mortgage deal, within six months, you can do so, no questions asked and no impact on your credit score. That gives people a powerful new tool for managing their monthly budgets – and it will begin taking effect within the next two weeks.”

This obviously provides homeowners with some flexibility in deciding what they do, although there is a fairly tight time limit for people to revert to their previous arrangements.

However, while people will have to make decisions according to their own personal circumstances, there must be a worry at an aggregate level that large-scale migration to interest-only mortgages amounts to storing up trouble for the future for the UK economy. Especially given things look so bleak on the economic front.

And, crucially, this second “thing” is another measure that does not involve the Government actually providing any direct financial support to those hit so hard by economic woe which many might view the Conservatives as having had a major hand in creating.

Of course, the question of direct assistance is a complex one and would have to be considered carefully, in terms of fairness in an overall societal context.

However, it appears to be the Conservatives’ natural inclination not to provide assistance - something demonstrated by Prime Minister Rishi Sunak’s almost perpetual impatience to end the coronavirus furlough scheme when he was Chancellor - that is the barrier to them even considering some more meaningful measures on mortgage help.

It is crucial that the situation is examined pragmatically.

And the Conservatives have a duty to reflect on whether some more effective pre-emptive assistance could be provided, while there is still time.