What Keir Starmer’s mortgages remark means for contractors

‘This shouldn’t be a country where people pay thousands more on a mortgage’ — decoded for contractors, ahead of Autumn Budget 2024. 

Prime Minister Keir Starmer made a pointed remark about the UK’s mortgage crisis at the end of last month.

The PM stated:

“This shouldn’t be a country where people are paying thousands more on their mortgage.”

For freelancers and contractors, who often work through Personal Service Companies (PSCs) or umbrella firms, this mortgages remark by the PM raises crucial questions as he made it in connection with Autumn  Budget 2024, writes Tom Hitchcock, owner of mortgage broker Broadbench, a financial advice firm for contractors.

What mortgage questions arise from Keir Starmer’s ‘Fixing the Foundations’ speech?

Is Starmer suggesting that a real solution to soaring mortgage costs will emerge on October 30^th?

That’s when new chancellor Rachel Reeves unveils the first fiscal statement from a Labour government in 15 years.

Or is the prime minister’s comment more of a reflection of public frustration, meaning Labour lacks a concrete plan for lowering monthly mortgage payments?

What Keir Starmer’s mortgages remark means for contractors

In his ‘Fixing the Foundations’ speech (Aug 27th), we believe the Labour leader spoke up to highlight the financial strain many homeowners, including contractors, are experiencing due to rising mortgage costs.

Over the past year, the Bank of England (BoE) has raised interest rates many times to curb inflation, leading to higher mortgage rates.

For contractors, who often secure mortgages through specialist brokerages, these increases can translate into thousands more in annual payments.

Our PM’s aspirational address of a problem affecting contractor mortgage-holders

While Starmer’s remark suggests that a Labour government might aim for more affordable mortgages, it’s important to understand that the PM alone cannot lower mortgage rates.

This responsibility largely lies with the BoE, the Office for Budget Responsibility (OBR), and financial institutions.

Even if our PM seeks to ease mortgage burdens, doing so would require a coordinated effort beyond political rhetoric.

Is inflation decreasing?

While inflation has eased somewhat, it may not be enough to significantly help mortgage-holders right now.

At the time of writing (September 2024), inflation currently sits around 6.7%, down from over 9% a year ago.

But it’s still far from the BoE’s inflation target of 2%.

So the impact of these higher interest rates is still being felt by homeowners.

Contractors and mortgages today

Many contractors who locked in fixed-rate mortgages a few years ago are now finding that the end of their fixed-term comes with a jump in monthly payments due to today’s higher rates.

In other words, despite some signs of inflationary relief, contractors — especially those who secured mortgages through specialist deals — are still feeling the squeeze.

These deals often start with lower rates, but as those rates expire, monthly payments can rise sharply.

Reaching out is the first step to get mortgage relief as a contractor

For contractors, especially those in industries like IT, navigating the mortgage market is more complex than it is for traditional employees.

Many rely on specialist brokers, who understand the variable income structures of freelancers.

However, contractors who locked into these mortgages may now find them considerably more expensive due to rising rates.

And contacting a lender directly, such as through their mortgage helpline, might not yield helpful advice.

Top two ways to tackle higher mortgage costs

If you’re a contractor facing higher mortgage costs, consider the following steps:

1. Talk to your broker

One of the big advantages of brokers like us is that on your behalf, we can access niche mortgage products that traditional lenders may not offer.

A broker may be able to help restructure your mortgage or find a better deal.

2. Seek financial advice

Contractors often have unpredictable incomes, making budgeting for mortgage payments challenging.

An independent financial adviser who understands contractor finances can help you explore alternatives.

Mortgage affordability as a contractor

And there’s no reason to be shy about this. Contractors are in a unique position when it comes to mortgage affordability, insofar as the traditional mortgage market simply doesn’t cater well to irregular income patterns.

The specialist broker therefore plays a crucial role, and from our vantage point, while we’d say our new prime minister’s comments are encouraging, it’ll take more than just promises.

In fact, to obtain real mortgage relief, contractors might need the offering of new products, flexible terms, or even government-backed mortgage schemes specifically designed for freelancers and contractors.

Autumn Budget 2024: mortgage repayment relief scheme is possible

To that end, Starmer’s comment (“This shouldn’t be a country where people are paying thousands more on their mortgage,”) may signal potential mortgage relief at Autumn Budget 2024 on Wednesday October 30th.

Past Budgets have included mortgage support schemes, some of which were open to contractors.

In 2024-25 however, many such schemes have by now been phased out.

So it’s possible that new tax breaks for first-time buyers or mortgage relief measures for homeowners struggling with repayments could be unveiled at Autmn Budget 2024.

And finally ahead of Autumn Budget 2024, talk mortgages but don’t pin..

However, we would advise talking to a broker who knows contractor mortgages back to front, rather than pinning your hopes on the contractor sector getting a mortgage repayment lifeline at the end of next month.

After all, even if such a mortgage repayment relief scheme or ‘holiday’ is unveiled, it is unlikely to fully resolve the home loan issues that contractors face, given that many such individuals still work outside the traditional PAYE system, which is what the vast, vast majority of lenders are primarily set up to cater for.

That’s why shrewd contractors shun the high street in favour of a broker whose deals just can’t be accessed any other way. In the meantime though, and as the Speaker of the House of Commons Lindsay Hoyle will say in just 44 days’ time, it’s now over to the chancellor of the exchequer, Rachel Reeves.