Speaking on Newsnight yesterday, Richard Fearon, chief executive of Leeds Building Society, said that although he was not one of the banking leaders meeting Chancellor Kwasi Kwarteng today, he would urge him to ensure his upcoming Budget assuaged the money markets.
“I would say one simple thing, which is we will do what we can. The Bank of England has calmed the troubled waters for a bit, but the government needs to reinstill confidence and credibility.
“It’s about the Budget, so we need a Budget where the sums add up, which is subject to independent scrutiny from the Office of Budget Responsibility. We can see the expenditure, taxation and growth assumptions, that it all hangs together, and if the market sees that and is reassured, the money market rates will come back down and mortgage rates will follow.”
In the long term, he urged the government to stick to its manifesto commitment of building 300,000 homes and said it is about “political will” as it had been achieved previously.
It comes after a week of upheaval in the mortgage market with lenders pausing business, pulling products and repricing as swap rates soared following the Chancellor’s mini Budget.
Fearon said that in the past week, 2,500 products were removed from the market and 50 per cent of lenders stopped lending. He added that this was coupled with a 20 per cent leap in customer demand, which created a perfect storm.
“Customers were going for the best buy and swamping that mortgage provider, they were withdrawing and then the customer was going for the next best buy.”
He said that its purpose as a building society was to “stand by the first-time buyer”, and it had sustained first-time buyer products throughout the week but had to reprice several times.
‘A hammer blow to households under stress’
Fearon continued that reports that two-year fixed rates had breached six per cent for the first-time in 14 years would mean an extra £5,000 a year in repayments. He added that this would be a “hammer blow to households that are already under enormous stress”.
“Unfortunately, the worst-case scenario can, in the end, be repossession but we will do everything in our power to stop that to be the case,” he noted.
“What I would urge anyone to do who is facing problems repaying is contact their lender. We have tailored support available to people depending on their circumstances.”
Fearon added that Leeds Building Society did not charge arrears fees and it would not charge them into next year either.
“We can play our part, but the government needs to play theirs,” he said.
