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Consumer advocate Martin Lewis said the mortgage time bomb he warned about before is now exploding.
The founder of MoneySavingExpert.com said on ITV’s Good Morning Bulletin that he had previously emphasized the “mortgage time bomb”.
He continued, “And I’m afraid the time bomb is about to explode now.”
Lewis said people will almost certainly have to readjust their finances to deal with rising interest rates.
Lewis’ comments came as moneyfact data showed the market’s average two-year fixed-rate mortgage rate rose to 6.07% yesterday, up from 6.01% the day before.
The average five-year fixed rate contract is now 5.72%. This is up from Monday’s average rate of 5.67%.
Mortgage options have also declined since Monday, with 4,641 home products available, down from 4,683 on Monday.
Lewis told Good Morning Britain how he expressed his views at the mortgage summit held by Prime Minister Jeremy Hunt last year.
He commented: “I’ve talked about banks increasing their margins. In other words, they’re making more money because they’re building up mortgages and not building up as much savings.
“And what we really need right now is do we make things better for mortgage holders, or do we make things better for savers, or, best of all, make things better for both? Political pressure, soft or hard.”
He added: “But a lot of the banks were sitting there nodding their heads.
“And many of the things I suggested they claimed they were already doing. You can switch to interest only, etc.
“But the big problem for me is that they don’t do it easily.
“And what I suggested at that meeting was, first of all, we need to be able to undo these things, so if we can do it temporarily, we can undo it without problems.” You know you can get it back.” That’s not the situation.
“And secondly, we need to look at minimizing the impact on people’s credit scores so that people are hesitant to take any action and have six years of rights from other forms of borrowing.” We fear that we will be deprived of our literacy.
“So the final outcome of the Mortgage Summit was a little more communication to borrowers.”
Lewis continued: “It’s about giving people flexible tools.
“And this is really important because ultimately there is very little we can do to protect people.
“If interest rates go up for three or four years, people will have to readjust their finances.
“There is nothing else to consider. They will have to rebalance their finances. And it will be a nightmare.
“Even if they wanted to, I don’t think this government would introduce a mortgage bailout.
Mr. Lewis believes that mortgage pressure will cost many middle- and upper-middle-income earners their livelihoods.
He also warns that the impact on mortgages is having significant knock-on effects for many renters, who currently spend a record percentage of their disposable income on rent.
He went on to say: And I think the whole point of what I called last October, and why we had the meeting in December, was the idea that we have to plan and put some mitigation measures in place before the crisis hits. increase.
“Because when the crisis hits, it’s too late. And we had that meeting, but we didn’t do it.”
“The idea of going back to where we were was not on the table,” Mr. Lewis said, reflecting on the recent surge in mortgage borrowing rates.
“And indeed, with the current forecast for interest rates, rates will continue to rise. The UK base rate is 4.5% and will rise to 5.5%, 5.75%,” he continued. “Fixed rates as they are currently quoted factor in these increases, so they could go down a little bit more.
He added, “My suggestion is that anyone in need, talk to a good mortgage broker. That’s their job and discuss what’s available.”
“If you can’t pay, talk to your financial institution as soon as possible.”