Mortgage pain needed to fight inflation, Sunak and Bank warn as rates hit 5%
Rishi Sunak said ‘we are going to get through this’ as he doubled down on his mission to halve inflation.
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Your support makes all the difference.The Bank of the England and Prime Minister have insisted that cash-strapped Britons need to take the pain from higher interest rates in order to quell inflation, after an unexpected hike to 5%.
Rishi Sunak told under-fire mortgage borrowers that “we are going to get through this” as he doubled down on his mission to halve inflation.
The Bank raised interest rates to a 15-year high of 5% from 4.5%, surprising economists who had been expecting a smaller increase and piling more pressure on mortgage holders.
Amid mounting pressure for failing to rein in rampant price rises, the Bank’s governor Andrew Bailey warned that inflation is “still too high and we’ve got to deal with it”.
He said the current level of wage increases is unsustainable, and pointed the finger at retailers building up profits through higher prices.
I’m here to tell you that I am totally, 100%, on it and it’s going to be OK and we are going to get through this
“We know this is hard – many people with mortgages or loans will be understandably worried about what this means for them,” he added.
“But if we don’t raise rates now, it could be worse later.”
Meanwhile, Mr Sunak vowed the Government will “remain steadfast” in fighting inflation, as it has also faced criticism amid the deepening mortgage crisis.
“I’m here to tell you that I am totally, 100%, on it and it’s going to be okay and we are going to get through this,” he told workers during an event in Kent.
Calls are growing for the Government to do more to help mortgage borrowers who are set for a big jump in their monthly repayments.
The so-called mortgage ticking time bomb is now “exploding”, consumer champion Martin Lewis cautioned earlier this week.
Financial markets are now predicting that interest rates will strike a high of 6% at the year-end amid warnings that 1.4 million mortgage holders will lose at least a fifth of their disposable income in additional repayments.
Both the Prime Minister and the Chancellor have resisted calls for extra help for voters with their mortgages, while Mr Sunak was at pains to stress that tax cuts – hoped for by Conservative MPs as a pre-election giveaway – were not affordable.
“We cannot, in a situation like this, borrow too much money because that makes everything worse,” he said.
“I’d love to cut your taxes tomorrow — you’d love that, I’d love that, of course I would — but that is hard to do because it means I would have to borrow more money to do it.”
We're not expecting, we're not desiring a recession, but we will do what is necessary to bring inflation down to target
Mr Bailey also denied that the Bank is trying to bring about a recession to control inflation, despite suggestions that it could be a tactic to put a lid on price rises.
“We’re not expecting, we’re not desiring a recession, but we will do what is necessary to bring inflation down to target”, he stressed.
The Bank said on Thursday it made the decision to hike rates more sharply due to “the background of a tight labour market and continued resilience in demand”.
Seven members of the nine-person MPC opted for the increase to 5%, but two members called for rates to remain flat.