Exclusive:Rachel Reeves hits back at risk criticism of increasing mortgage borrowing levels
The Chancellor has hit back at criticism that her new mortgage borrowing rules are too risky, saying that renters are currently “throwing good money after bad” while unable to get on the housing ladder.
Rachel Reeves announced sweeping reforms to the UK’s financial sector in the West Yorkshire city this morning, ahead of her annual Mansion House speech tonight.
She admitted the Government hasn’t “got everything right” after a tough couple of weeks, with the economy contracting and a major welfare rebellion, but said her ‘Leeds Reforms’ would ensure that people "wherever they are in the country are better off”.
Speaking to The Yorkshire Post from Lloyds Banking Group’s office in Wellington Place, Ms Reeves said that the name “shows that as we seek to grow financial services in the UK, we want it to benefit all parts of the UK”.
Leeds has the biggest financial services and fintech sector in England outside of London, and the Chancellor claimed the changes “will help create good jobs and pay good wages in all parts of Britain, including in Leeds and West Yorkshire”.
As part of the Chancellor’s announcement more mortgages will be available at more than 4.5 times a buyer’s income, following recent Bank of England recommendations that some lenders can offer more high loan-to-income mortgages if they choose to.
This will create up to 36,000 additional mortgages for first-time buyers over the first year, and from today eligible first-time buyers can apply for Nationwide’s Helping Hand mortgage with a £30,000 salary and joint applicants with a £50,000 combined salary.
However in January, Nikhil Rathi, chief executive of the Financial Conduct Authority, who attended the meeting, warned that “things are going to go wrong” by relaxing regulations.
Ms Reeves pushed back at suggestions that increasing the amount buyers can borrow would be too risky when it comes to home repossessions, which have shot up in recent years.
She said: “I'm not in the business of denying opportunities for families and young people.
“At the moment, people are forking out a fortune in paying rents and they can't get on the housing ladder - it's ridiculous.
“If you can afford that rent every month and you've got a track record of being able to pay that rent - you should be able to get a mortgage.
“You're throwing, I'm afraid, good money after bad - someone else's mortgage, rather than paying off your own mortgage and getting a foot on the housing ladder.”
She made the point that her parents - who were both primary school teachers - were able to buy their first house together in their twenties.
“How many primary school teachers today can get on the housing ladder?,” she said, before adding: “It’s really, really hard.”
Ms Reeves said the changes should also mean “small businesses in my constituency, in Bramley or in Pudsey or in other parts of Yorkshire, are going to find it a little bit easier to access the capital they need to grow their business”.
“That's really exciting because we know that the majority of jobs in West Yorkshire actually come from small businesses.”
The aspect of the Leeds Reforms, Ms Reeves said, was providing financial advice to savers to help them get better rates.
“In recent years, financial advice is something that's been the preserve of the wealthiest, and actually people who need financial advice most are those that are on middle and modest incomes,” she explained.
“The changes we've announced today will mean that people's savings can work better for them.
“So whether you want to go on the housing ladder, whether you're a small business trying to grow your company, or if you're a saver who's found that your returns have not kept up with the prices in the shops or the interest rates in the economy, that will change because of the Leeds Reforms.”
Ms Reeves said she was “proud of what we’ve achieved as a Government” despite a turbulent few weeks that saw a teary appearance at Prime Minister’s Questions rock the markets.
“Government's never gonna be easy, the inheritance that we got when we came into office last year was not the inheritance that I wanted,” she told this paper.
“But look at what we have achieved in the first year of this Labour government - NHS waiting lists are down by over a quarter of a million.
“We are rolling out free breakfast clubs at primary schools, free school lunches for kids at primary, secondary and FE colleges.”
She also cited the funding for a West Yorkshire mass transit system.
“Of course, we haven't got everything right, but I'm proud of the difference we're making,” she added.