Prime Minister Rishi Sunak has firmly backed the Bank of England’s recent decision to raise interest rates from 4.5 to 5 percent, asserting that stamping out inflation leaves no room for alternatives. During his appearance on the BBC’s Sunday with Laura Kuenssberg programme, Sunak voiced his unwavering support for the central bank’s actions, emphasizing that inflation poses a genuine threat to individuals, eroding their financial well-being. The consecutive interest rate rise, marking the 13th hike in just 18 months, has placed added strain on mortgage holders across the nation.
Responding to queries about potential alternatives to raising interest rates, the prime minister confidently stated that there is no viable option other than addressing inflation head-on. While acknowledging the associated challenges, Sunak stressed the importance of staying the course and maintaining confidence in the plan, assuring the public that the nation will successfully navigate this period of economic uncertainty.
Bank of England Governor Andrew Bailey echoed Sunak’s sentiments, underscoring the imperative of tackling inflation, which continues to exceed the bank’s 2 percent target. Recognizing the concerns of mortgage and loan holders, Bailey acknowledged the difficulties they face but stressed that failure to raise rates now could lead to a more precarious situation in the future. The commitment to restore inflation to the desired level remains resolute.
Chancellor of the Exchequer Jeremy Hunt joined in supporting the bank’s decision, highlighting high inflation as a destabilizing force that eats into wages and slows economic growth. Hunt pointed out that core inflation is higher in 14 European Union countries, and interest rates are increasing worldwide. Drawing from international experiences, he emphasized the need to remain steadfast in order to rein in inflation. The government’s determination to alleviate pressure on mortgage-stricken families is unwavering, as they believe acting now will prevent a worse outcome down the line.
In response to mounting concerns over mortgage affordability following the interest rate hike, Chancellor Hunt convened a meeting with major lenders to address the growing mortgage crisis. Encouraging developments emerged from the meeting, as agreements were reached with banks and lenders to provide borrowers with greater flexibility. Anxious borrowers will have the option to switch to interest-only payments or temporarily extend the length of their mortgages, without any impact on their credit scores. These measures aim to offer comfort and ease financial worries. Lenders have also pledged increased leniency towards individuals at risk of losing their homes, implementing a minimum 12-month period before repossession without consent.
While the opposition Labour Party has called for more substantial assistance to struggling mortgage holders, both Prime Minister Sunak and Chancellor Hunt have ruled out financial intervention, fearing it could further contribute to inflationary pressures. They assert that addressing stubbornly high inflation remains the government’s top priority and emphasize the need for unwavering resolve to stabilize prices. However, opinions on Labour’s proposed five-point plan, which includes delaying repossession proceedings and reversible changes for borrowers, are divided. Experts, such as Tom Clougherty from the Centre for Policy Studies, argue that the plan might overlap with existing voluntary actions by lenders and potentially increase costs for borrowers.
Overall, the government strongly supports the Bank of England’s decision to raise interest rates as a strategic measure to combat inflation, leaving no room for alternative approaches. While offering some flexibility to mortgage holders facing challenges, they stand firm against financial intervention, considering it a potential contributor to inflationary pressures.
