Consumer champion Martin Lewis has given his verdict on the Bank of England’s decision to raise interest rates by 0.5 per cent, spelling further pain for mortgage holders.
The central bank’s base rate now sits at 5 per cent, after its monetary policy committee opted for its 13th consecutive hike since March 2020, as Bank officials seek to tame decades-high levels of inflation.
While markets had been bracing for a base rate rise of 0.25 per cent, fears of a more severe hike were heightened on Wednesday after official figures showed inflation had failed to fall – while, worryingly, core inflation – which excludes food and energy – hit a 31-year high.
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Mr Lewis, who met Chancellor Jeremy Hunt on Wednesday ahead of the announcement, had already warned that a mortgages “timebomb” had now “exploded” in the UK.
Following the Bank’s decision, the MoneySavingExpert founder said: “It's very hard to know how to react to a 0.5 per cent increase in rates at this time. Clearly, we must tackle inflation, but this one trick method is causing huge pain to many on variable [deals] and coming off fixed-rate mortgages.”
He called on people to “spare a thought for mortgage prisoners who've been paying over the odds for 15 years”, adding: “Many will now have totally unaffordable 9 per cent mortgages. Help for them is desperately needed.”
The consumer champion was far from the only dismayed voice reacting to the latest increase, with Dr George Dibb of the progressive IPPR think-tank warning that the hike “risks doing more harm than good”.
A government adviser said the Bank had to ‘create a recession’— (Getty/PA)
“The Bank of England has been forced to take action because of government inaction. This will put enormous pressure on mortgage holders, and we are now on the precipice of intentionally pushing the economy into recession,” Dr Dibb warned.
The previous day, JP Morgan’s Karen Ward, who sits on Mr Hunt’s economic advisory council, said that the Bank had to “create a recession”, as she warned there were “certainly signs” that a price-wage spiral is emerging, which the central bank “has to nip in the bud”.
“They have to create uncertainty and frailty, because it’s only when companies feel nervous about the future that they will think, ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think, ‘Oh, I won’t push my boss for that higher pay’.
“It’s that weakness in activity which eventually gets rid of inflation.”
Rishi Sunak gave his support to the Bank of England “to bring inflation back down to target”, as the PM told the Times CEO Summit on Thursday that there was “global concern about the persistence and stickiness of inflation, and the need for central banks to take strong action to take inflation down”.
But Lib Dem leader Sir Ed Davey warned the rate rise will “scar family finances for years to come, all because this Conservative government crashed the economy and sent mortgages spiralling”.
