Martin Lewis: My mortgage conversation with the Chancellor – and why banks should come to the public's aid

Martin discussed the issues in the latest episode of BBC Radio 5 Live's The Martin Lewis Podcast. A video clip from the recording of the podcast and its transcript are below.

The Martin Lewis Podcast – Wednesday 21 June 2023

Video courtesy of BBC Radio 5 Live. Listen to the full podcast on BBC Sounds, Spotify or Apple Podcasts.

Transcript of what Martin said…

Here's a direct transcript of what Martin said, though we've split it into sections for ease.

Martin's meeting with the Chancellor

Martin's podcast co-presenter Nihal Arthanayake: "So we're going to talk mortgages. And because I'm looking at a picture of you on your Twitter, sitting in a very, very official looking residence, wearing exactly what you're wearing right now, which means that either you haven't changed your clothes or you've come almost straight from a meeting with the Chancellor to be on this show and tell us about...

"Well, I know for a fact that you can't tell us what you said, and it wouldn't be right or proper for you to do so. But coming from the meeting, what I can ask you is your thoughts post-meeting? And, if any, the runes – because we like to talk about runes with you – you may have read."

Martin: "So I was asked to go into an urgent private meeting with the Chancellor to discuss mortgages yesterday, I believe it was. So I went there at 10.30 this morning and we had a chat for half an hour. As you rightfully say, it was a private meeting, so I cannot discuss the meeting itself, but I'm very happy to give you my views on what should be happening with the mortgage system.

"And you could certainly say that I am not a shrinking violet when it comes to giving my views to whomever I happen to be talking about it to at the time." 

Martin raised the alarm on the mortgage ticking time bomb last autumn

"The back story to this meeting is that I raised the alarm on what I call the ‘mortgage ticking time bomb’ last autumn and said, look, interest rates are going to go up, we've got lots of people coming who are going to come off their fixes, hundreds of thousands of them. And they are going to face an enormous bill shock when they come off their fixes.

"If interest rates go up as high as predicted, it's going to be really, really problematic. And therefore, we need preventative measures now in case it happens – I didn't know it was going to happen – in case it happens, we shouldn't leave it until it has happened.

"So in December, there was a mortgage summit with the Chancellor, myself, the head of the regulator, and all the bosses of banks. And we talked through many things and there were lots of nods in there. But apart from some communication, very little happened, I think perhaps because the powers that be thought, well, interest rates aren't going up quite as high as expected and they didn't in April, but they're there now.

"And quite clearly the mechanisms that were talked about in that December meeting should have been put in place. And that was the whole reason why I was pushing for it, was to have prevention in case we get to this stage. It wasn't a prediction. It was an in case. It was an insurance, in case we do and we're now here.

"And so, of course, my view is that many of the things we talked about in that summit need to now be put in place."

This is all caused by the Bank of England putting up UK interest rates

"So let's just open this with where we are. One of the big issues that's going on, I mean, and the cause of all this is the Bank of England is putting up UK interest rates.

"So let's be absolutely blunt. The reason it does that is to take money out of the economy by making lending, including mortgages, more expensive for people so you have less disposable income. All those people who get in touch with me and say I'm not going to be able to afford anything else because my mortgage is going up. That is the point.

"This is not accidental. It is not coincidental. It is not a byproduct. It is a direct policy to squeeze incomes of those who have borrowings so they put less money in the economy to bring down inflation."

Mortgage lenders and banks are making more profit by not upping rates for savers

"So one of the first things I would say is one of the problems going on at the moment is mortgage lenders and banks in general are increasing their margins. They're making profits from interest rates going up by upping the rates for lenders and not upping the rates commensurately for savers. And that is a real problem.

"Now, of course, what mortgage holders would like, is they would like them not to put the mortgage rates up. And what savers would like, is they'd like the savings rates to go up.

"In reality, I think it's unlikely to see much political pressure saying let's bring mortgage rates down because that defeats what the Bank of England is trying to do. That's the whole point of putting interest rates up.

"But I do think it's perfectly plausible to see pressure put on banks to increase savings rates, to reduce their margins, because if you increase savings rates, that's another way – encouraging saving – of getting people to take money out of the economy, which helps inflation."

When times were difficult for the banks, taxpayers came to their aid – now they need to come to the public's aid

"So I would certainly be pushing for a decrease in margins and I would want some of the money, the increased profits that banks are making. And let's just remember for a second, I used to be of a very clear mode – we shouldn't rely on banks to rescue us; it should be regulators and politicians.

"But in the 2007 financial crisis, we – taxpayers, the state – rescued banks. They were too big to fail. When times were difficult for the banks, we came to their aid.

"Times are difficult for the public right now. They [the banks] are making increased profits. That is wrong. They need to come to the public's aid. Banks need to not be increasing their margins and effectively profiteering from interest rates. What they need to do is come to the public's aid.

"And I think the way that that is probably most likely to work is by upping rates for savers and by putting money aside to aid on forbearance."

Each bank offers different support for those struggling – which is a problem

"Now, the forbearance plans and the things I wanted on that, I've been pretty public on. Many of them, you're able to do at the moment: payment holidays, shifting to interest-only, extending your term, reducing your payments.

"The problem is people are very reticent to do them because each bank does it differently. You don't know your rights. It isn't easily reversible. So if you want to get yourself over the hump and do this for three or four months, you can't necessarily go back to the old structure, say if you increased your term and it has an impact on your credit file.

"Now in the pandemic, we had a precedent of minimising the impact on people when they came and asked for help on their credit file. So we didn’t effectively, from a little bit of helping them get over the hump, ruin their ability to stay within the competitive system for the next six years."

"They were the type of things I was suggesting back in December. They have not been put back into place, been put into place. I think they should be put into place."

We need a charter of mortgage rights when you're struggling

"And, more so, I actually think what we need is a charter of mortgage rights when you're struggling. Good, clear, concise communication of: "here are your rights, here's what's available for you".

"Every bank must provide all of these solutions, so that we have a unification of the measures – because at the moment they all do it slightly differently, it's confusing, people don't trust their banks – and we should launch a mortgage charter of the rights you have if you're struggling to pay.

"Good communication – you know, Chancellor, banks, me, [consumer group] Which?, the regulator, all come together, explain to people: talk to your banks, here's what's available, here's what they must do. So that people are not scared to talk to them when they're struggling and they know what the impact will be. Hopefully we reduce the impact on credit scores. Hopefully we allow it to be reversible.

"So you launch that, you make the banks put money into those forbearance measures, rather than increasing their margins. You help savers a little bit. Hopefully there'll be knock-on benefits to people who rent at the same time because of course, mortgages going up is hitting renters, too.

"So that's the type of package I would suggest on the radio. And you are right, I had a meeting with the Chancellor this morning and I of course, when I was in there, there may well be similarities between what I'm saying to you and what I said to the Chancellor."