Labor will soon regret blaming the Tories for the mortgage crisis

“You may have just lent us your vote,” Boris Johnson said after his landslide victory in the Get Brexit Done 2019 election.

He was speaking to Labour’s Red Wall seats in the Midlands and the north of England, which voted for the Conservatives, in some cases, for the first time.

Johnson knew he needed to invest heavily in these areas if he wanted to maintain these gains after the Brexit deal was concluded. This is where the “levelling up” agenda was born. And without the pandemic, it could have worked.

This time it was Labor who borrowed votes. Sir Keir Starmer’s majority has been described as “a mile wide but an inch deep”. In many seats Labor won thanks to Reform’s success in swallowing up Conservative votes. So far, the Prime Minister has done very little to reward these voters.

Rather than borrowing from Johnson’s playbook, it appears Starmer and Chancellor Rachel Reeves are determined to make these voters regret their decision before the end of the year.

Take the owners. The stamp duty “surcharge” has been increased on second homes, probably to prevent investors from buying shares for their portfolios. That’s fair enough, you might say.

But due to separate changes to stamp duty thresholds, virtually everyone who buys a property after April will pay significantly more for the privilege – including first-time buyers. Many of them will have desperately saved for years to climb the ladder, and now they will have to find a few thousand more to hand over to HMRC.

First-time buyers will rightly feel like they have been betrayed by a party that claims to be on their side.

But there is a bigger problem brewing in the real estate market that will soon add to the growing discontent with the government.

Despite hopes that the Bank of England would have already made several further rate cuts, mortgage rates have remained stubbornly high. After a decade of the lowest interest rates in history, we have returned to the historical average.

Mortgages have largely fallen out of the news as we all adapt to the new economic normal. The widespread use of fixed-rate loans has so far protected hundreds of thousands of borrowers who entered into five-year deals during the pandemic.

The typical five-year mortgage deal in July 2020 was just 2.25%. This was the average, meaning thousands of people got even lower rates: as of October 2021, HSBC was selling five-year mortgages at 0.91%. Never before has money been so cheap, and it may never be again.

Today, the average five-year contract is more than five times higher, at 5.28%.

Assuming a mortgage repayment of £300,000, someone on this historically low HSBC rate would see their monthly payments rise from £1,100 to £1,800, an increase of more than 60%.

That’s £700 a month which will now go towards paying off a loan, rather than savings, holidays and life’s little luxuries.

Reeves’ tax and spending budget did almost nothing to change the Office of Budget Responsibility’s economic growth projections, which it expects to remain embarrassingly low for the duration of this legislature. Growth will not help the Chancellor.

Fortunately, the banking industry is going out of its way to keep people in their homes and foreclosures fortunately remain low.

But in a year or two, when the last ultra-low loans expire, I know who homeowners will blame for the sudden drop in their living standards, and it won’t be the Tories.

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