- Rising Interest Rates: Homeowners and Debtors Urged to Remain Calm
- Impact on Mortgage Payments: Millions to Face Higher Costs
- Criticism and Different Perspectives: Support for Bank of England Divided
The Prime Minister of the United Kingdom has urged homeowners and debtors to “hold their nerve” in the face of rising interest rates intended to curb inflation.
Rishi Sunak stated on Sunday with Laura Kuenssberg, “I want to reassure everyone that we will get through this if we maintain our composure and stick to the plan.
The Bank of England increased interest rates to a 15-year peak of 5% this week.
As a result of the increase, mortgage payments for millions of people will rise.
According to the National Residential Landlords Association, renters may experience increased costs or the possibility of their landlords selling their property.
Mr. Sunak continued to support the Bank of England despite the assertions of some Conservatives that it had not done enough to return inflation to its target of 2%.
Inflation, which measures the rate at which prices are rising, remained at 8.7% in May despite 13 rate hikes by the Bank since December 2021.
“As prime minister, I can assure you that the Bank of England is acting appropriately,” Mr. Sunak stated. “I support the Bank of England without reservation. Inflation is a threat.”
Ed Davey, the leader of the Liberal Democrats, criticized Mr. Sunak’s patronizing remarks.
He stated, “The people need assistance, not a prime minister telling them to keep their cool.”
“Troubled homeowners will be justifiedly enraged after observing an out-of-touch prime minister who has no comprehension of the anguish rising mortgage rates cause.”
Mr. Sunak has vowed to cut inflation in half by the end of the year.
Former Treasury Minister Andrea Leadsom, however, accused the Bank of acting “too little, too late”
While Karen Ward, a member of Chancellor Jeremy Hunt’s economic advisory council, stated that the Bank had “been too hesitant” in its interest rate increases thus far and urged it to “create a recession” to bring inflation under control.
Mr. Sunak stated, “I’ve never claimed it’s not difficult. I’ve never claimed that this period won’t be challenging to endure. But what I want to convey to people is that we have a plan, that the plan will work, and that we will get through this.”
In anticipation of rising interest rates, banks, and building societies have withdrawn mortgage agreements in recent weeks.
The average two-year fixed mortgage rate is currently 6.19 percent, while the average five-year rate is 5.82 percent. In June of 2012, these rates were closer to 3 percent.
Last week, Chancellor Jeremy Hunt met with UK institutions who have agreed to allow borrowers to temporarily modify their mortgage terms.
The voluntary modifications allow homeowners to pay only the interest on their mortgages, and according to Mr. Hunt, this will not affect the credit scores of borrowers.
Labour has demanded that the agreements be made mandatory and implemented throughout the financial industry. Lisa Nandy, housing secretary for Labour, estimates that two million people “will not experience the benefits” if this is not the case.
The government must “not just talk a good game,” Ms. Nandy told Laura Kuenssberg on Sunday, “but ensure it happens.”
Elsewhere Labour has urged banks to pass on rising interest rates to depositors to reduce inflation.
The Lib Dems have proposed a Mortgage Protection Fund that would provide monthly grants of up to £300 to homeowners with the lowest incomes and the steepest rate increases.
