Welsh MP accuses mortgage lenders of treating homeowners as ‘cash cows’

David Chadwick, the Liberal Democrat MP for Brecon, Radnor and Cwm Tawe, has accused mortgage lenders of treating homeowners as “cash cows”, with mortgage rates failing to fall in line with interest rates.

His comments come after House of Commons Library research, commissioned by the Liberal Democrats, found mortgage rates have fallen at a significantly slower rate than the fall in the Bank of England base interest rate over the past year, costing homeowners over £1,000 a year.

For new mortgages the estimated average monthly payment has fallen by just £90 a month to £1,189 from £1,279 for two-year fixed rates and by only £26 a month from £1,204 to £1,178 for five-year fixed rates.

The research revealed that if instead two and five-year fixed mortgage rates had fallen by 19%, in line with the base rate, then homeowners would be paying a further £41 and £87 a month less respectively.

This would mean that mortgage holders would be saving £492 a year on a two-year fixed rate and £1,044 a year on a five-year fixed rate mortgage.

‘Sky high mortgage rates’

Mr Chadwick has urged Rachel Reeves has to “stand up for struggling mortgage holders in Wales” and called on the Chancellor to reverse the Conservative Party’s tax cuts for the big banks as they see billions in profits from sky high mortgage rates.

He said: “It’s really disappointing to see that hard-working homeowners in Wales are being used as cash cows by mortgage providers, particularly in the midst of a cost-of-living crisis tightening so many people’s purse strings.

“The Government has been far too timid and wrong-footed in tackling the cost of living crisis. Mortgage rates are crippling homeowners, and spiralling energy bills leave people wondering how they will put food on the table.

“The Chancellor must stand up for struggling Welsh mortgage holders, and she can start by reversing the Conservative Party’s unfair tax cuts for the big banks, who are making billions in profit off the back of sky-high mortgage rates.”

Inflation

Last week, the Bank of England has cut interest rates to 4%, marking the lowest level for more than two years.

In a tight decision, rate-setters at the bank opted to cut rates for the third time this year. The bank reduced the rate despite an uptick in inflation, as households see increased energy and food costs.

The reduction was the fifth time interest rates have been cut since the start of last year, coming down from a peak of 5.25%.

Three more meetings will be held this year when policy makers will be able to vote on interest rates.

Bank of England governor Andrew Bailey said last week that interest rates are still “on a downward path”, pointing towards further reductions.

The Bank’s report also indicated that it currently assumes that interest rates will drop to 3.5% next year.