'There is light at the end of the tunnel': Rishi Sunak assures homeowners as interest rates set to hit 15-year high

2 August 2023, 18:13 | Updated: 2 August 2023, 18:25

The Bank of England is set to raise interest rates to 5.25 percent tomorrow - their highest rate since the financial crash despite Rishi Sunak saying there is "light at the end of the tunnel" in the cost-of-living crisis.

The further pain on borrowers comes despite Prime Minister Rishi Sunak telling LBC that there is "light at the end of the tunnel" regarding the cost-of-living crisis.

The central bank policymakers are expected to vote through the fourteenth rise in the base rate tomorrow - with Sunak taking calls from worried voters with Nick Ferrari ahead of the announcement.

Interest rate rises are intended to dampen rising inflation - with the last half-point jump coming on the back of an easing of price increases to 7.9% year-on-year in June.

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Mr Sunak told LBC’s Nick Ferrari: “I know families are struggling with the cost of living and that’s why I set it out as my first priority to halve inflation, and we’re making progress.

“Is that as fast as I’d like? No. Is it as fast as anyone would like? No. But the numbers most recently that we had show that we’re heading in the right direction, inflation is coming down, and I think people can see light at the end of the tunnel."

The Prime Minister made it his Government’s top priority to halve inflation – a measure of how much prices for goods and services have increased over time – in 2023.

The rate needs to be around 5% or lower by the end of the year for Mr Sunak to meet his pledge, with Consumer Prices Index inflation at 7.9% in June – down from 8.7% in May and the lowest rate since March 2022.

Mr Sunak told LBC’s Nick Ferrari: “I know families are struggling with the cost of living and that’s why I set it out as my first priority to halve inflation, and we’re making progress.

“Is that as fast as I’d like? No. Is it as fast as anyone would like? No. But the numbers most recently that we had show that we’re heading in the right direction, inflation is coming down, and I think people can see light at the end of the tunnel.

“But, look, we’ve got to stick to the plan, it’s not easy to bring down inflation. It requires me to make difficult but responsible decisions on behalf of the country.

“They’re not easy, I get flak for them, but I’m going to do them because they’re the right thing for everybody in the long term, and I’m determined to stick to the course and bring down inflation for everyone.”

After hearing from a caller about their mortgage situation, Mr Sunak said: “It’s inflation that’s causing everyone problems with their bills, it’s inflation which means the Bank of England is having to put up interest rates.