Interest rates to stay high for three years Bank of England warns, piling pressure on mortgage payers
Homeowners face three years of sustained mortgage pressure due to years of projected high interest rates, with Chancellor Jeremy Hunt leaving the door open to more support for families.
The Bank of England has warned that rates are unlikely to start coming down any time soon after hinting the base rate is expected to stay above 5 per cent into 2026.
It announced another rise of 0.25 percentage points on Wednesday â the fourteenth consecutive rise â bring rates to a 15-year high of 5.25 per cent.
Responding to the interest rates announcement, Mr Hunt said the Government would âcontinue to do what we can to help householdsâ facing higher mortgage bills.
Treasury sources said the Chancellor was ânot necessarilyâ hinting at imminent measures to ease the strain on borrowers but âreferring to the billions of support weâre giving to people right now, and a tonne of other measuresâ.
Mr Hunt acknowledged the rise in interest rates would be a âworryâ for families and businesses but insisted the Government must stick to its plan to bring down inflation.
He said it was important not to âveer around like a shopping trolleyâ and follow the Governmentâs current path in order to meet its key goal of halving inflation.
The Chancellor told broadcasters: âAny rise in interest rates is a worry for families with mortgages, for businesses with loans.â
He added: âWhat the Bank of England Governor is saying is we have a plan that is bringing down inflation, solidly, robustly and consistently.
âSo the plan is working, but what we have to do as a Government is that we stick to that plan, we donât veer around like a shopping trolley.â
Labour highlighted the long-term pain predicted by the increases in mortgages, highlighting the Bankâs report which suggested steep rises in buy-to-let mortgage costs will be âpassed on to rentersâ and suggestions house prices will fall by up to 5 per cent in the second half of 2023.
Four million more households who have not yet faced increased mortgage costs will do so by the end of 2026, according to the Bankâs forecast.
And mortgage holders on tracker deals face nearly ÂŁ24 per month being added to their payments, on average, according to figures from trade association UK Finance.
Shadow Chancellor Rachel Reeves said: âThis latest rise in interest rates will be incredibly worrying for households across Britain already struggling to make ends meet.
âThe Tory mortgage bombshell is hitting families hard, with a typical mortgage holder now paying an extra ÂŁ220 a month when they go to remortgage.
âResponsibility 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.â
The Bank suggested rates would stay high for longer, saying base rate would be âsufficiently restrictive for sufficiently long to return inflation to the 2 per cent targetâ.
The Bank said that markets expect its base interest rate to keep rising to 5.8 per cent in the last quarter of this year, 5.9 per cent in the last quarter of next year, before falling, to 5 per cent in the last quarter of 2025.
Treasury sources told i on Wednesday that Mr Hunt is open to looking again at what banks and lenders could be asked to do to ease the financial strain on families.
Mortgage lenders representing over 90 per cent of the mortgage market have signed up to the Governmentâs new mortgage charter, committing them to additional support for borrowers.
This includes giving homeowners approaching the end of a fixed-rate mortgage the chance to lock in a deal and request a better like-for-like deal if rates change up to six months ahead and a guarantee of no repossession within 12 months of a first missed payment.
With the number of repossessions still low at the moment, Mr Hunt it not poised to take further measures unless it appeared that the charter was not having the desired effect it is understood he is not ruling anything in or out.