Fears that Britain's economy is stuck in a 'low-growth trap' after Bank of England hikes interest rates AGAIN to 15-year high of 5.25 per cent in blow to homeowners - as experts guess they could rise to 6 per cent
- How will the interest rate hike affect YOU? Email eirian.prosser@dailymail.co.uk
Chancellor Jeremy Hunt last night warned that Britain's economy is stuck in a 'low-growth trap' - after the Bank of England hiked interest rates again to a 15-year high of 5.25 per cent in yet another blow to homeowners.
The spike interest rates, which saw the Bank's Monetary Policy Committee increase the base rate by 0.25 per cent yesterday, leaving it at a level last seen in 2008.
And adding more to the woes of mortgage holders, financial experts warned that the rates could rise as high as 6 per cent over the next year.
The Bank quickly sought to defend its decision, voicing concerns that inflation was becoming engrained in the UK economy, adding that interest rates needed to be kept 'sufficiently restrict for sufficiently long' to ease rising costs.
The 14th consecutive increase seen yesterday comes as experts suggested better-than-expected inflation figures last month meant that the rate rise had largely been factored into deals already.
Speaking following the announcement, Mr Hunt said he was determined for the UK to escape low-growth and become one of the most booming economies across the globe.
He told Sky News: 'What you'll see from me in the autumn statement is a plan that shows how we break out of that low-growth trap and make ourselves into one of the most entrepreneurial economies in the world. That's what we want.'
He went on to acknowledge that the rise would be a 'worry for families with mortgages' who said the jump had created a 'bloodbath', with some mortgage lenders seeing their variable rate plans double within a matter of weeks.
Others have been less assured by the cycle of rate rises, with some economists urging the Bank to come up with a different plan.
Laith Khalaf, head of investment analysis at AJ Bell told the Times: 'The Bank's own numbers show that more interest rate hikes will make almost no difference to inflation in the long term.
'But they will of course inflict more pain on consumers and businesses, and in particular mortgage holders.'
Data from financial experts at Moneyfacts today said the average two-year fixed rate mortgage rate is now 6.85 per cent, while the average five-year rate is 6.36 per cent.
It prompted concerns from worried homeowners, with some questioning how they would be able to afford food and fuel following the rise.
Other economists, however, have warned that inflation rates are not expected to be cut down until later in 2024, subsequently dealing a blow to the Conservative Party who hoped to see Rishi Sunak's government boost the economy by the start of next year.
The forecast means the Prime Minister could be facing a general election with homeowners across the country struggling to pay their bills as a result of high mortgage rates.
Paul Dales, chief UK economist at Capital Economics, said that the Bank of England was learning from patterns seen in '1970s and 1980s' that revealed core inflation will only fall from its peak 'slowly'.
He added that 'cutting interest rates too soon risks reigniting inflation'.
Indeed, the Chancellor appeared to reinforce this point, adding yesterday: 'If we stick to the plan, the bank forecasts inflation will be below 3 per cent in a year's time without the economy falling into a recession. But that doesn't mean it's easy for families facing higher mortgage bills so we will continue to do what we can to help households.'
'What the Bank of England governor is saying is we have a plan that is bringing down inflation, solidly, robustly and consistently,' he added. 'So the plan is working, but what we have to do as a government is that we stick to that plan, we don't veer around like a shopping trolley.'
Shadow chancellor Rachel Reeves, however, branded the move as a 'Tory mortgage bombshell' that is 'hitting families hard'.
She noted that a 'typical mortgage holder is now paying an extra £220 a month when they go to remortgage'.
She added: 'This latest rise in interest rates will be incredibly worrying for households across Britain already struggling to make ends meet.
'Responsibility for this crisis lies at the door of the Conservatives that crashed the economy and left working people worse off, with higher mortgages, higher food bills and higher taxes.'
Homeowners were quick to speak out about the effect the rocketed rate would have on the,
Peter Snieg bought his home under the Government's Help To Buy scheme, but his payments are set to jump dramatically when his fixed rate deal ends early next year.
The father-of-two told BBC News today: 'Somehow we're supposed to spend less and find £750 extra a month to pay. So for many families it's a terrifying situation.
'If you have young families like ourselves who've been sold into the housing market by government who's advertised Help To Buy as an affordable scheme, when things become unaffordable you can't simply turn around and say that's your problem.'
Elsewhere, Angela Ramsell, from Llanrhaeadr-ym-Mochnant, Powys, is having trouble selling her house as she tries to move to Chichester to be near her son Charlie.
The 59-year-old mother, who has incurable blood cancer, fears that if she cannot find a buyer for her quaint £375,000 cottage on sale with Roger Parry, she might not be able to buy a new build in the West Sussex city.
Ms Ramsell added: 'There's nothing wrong with my cottage, the location is fabulous. It's literally that the market is stagnant.
'So my biggest fear is that I won't get a buyer in time for the completion of the property that I want to buy.'
It comes as rising mortgage rates cause a major slowdown in the Welsh housing market in Wales.
She told BBC Wales that one potential buyer pulled out just hours before the deadline to exchange contracts – which happened while she was hooked up to her infusion, so 'the timing couldn't have been worse, it meant I was back to square one'.
Mortgage holders on tracker deals face nearly £24 per month being added to their payments, on average, following the latest Bank base rate rise.
Based on the mortgages outstanding, the new 0.25 percentage point rise - which takes the base rate to its highest level since early 2008 - will add on £23.71 typically to monthly tracker payments, according to figures from trade association UK Finance, adding up to nearly £285 per year.
For homeowners on a standard variable rate (SVR) mortgage, the average payment could increase by £15.14 per month or nearly £182 per year. SVRs are set by individual lenders and often follow movements in the base rate.
Taking all 14 base rate rises into account, average monthly payments will have increased by £488.50 for tracker deals and, assuming base rate rises have been fully passed on, £311.90 for SVRs.
This adds up to an average annual increase of £5,862 for homeowners on tracker mortgages and £3,742.80 for SVR customers.
Around eight in 10 (81 per cent) homeowner mortgages outstanding are fixed-rate deals - but these households could be in for a bill shock when their current deal ends.
Around 800,000 fixed-rate deals are ending in the second half of 2023 and 1.6 million deals are due to end in 2024, according to UK Finance's figures.
https://news.google.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?oc=5
2023-08-04 00:43:38Z
2270571690
Tidak ada komentar:
Posting Komentar