Tories criticised for ‘appalling mismanagement of economy’ as mortgage rates set to rise after interest rates held

9 May 2024, 18:23

Sarah Olney discussed the impact of the interest rates.
Sarah Olney discussed the impact of the interest rates. Picture: Alamy

By Jenny Medlicott

The Liberal Democrats have hit out at the Conservatives after the Bank of England held interest rates again on Thursday.

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Speaking to LBC’s Tom Swarbrick, the party's Treasury spokesperson Sarah Olney said that the Tories had “no doubt” played a part in the increased mortgage rates faced by many in recent years.

Ms Olney said the constant changes to rates over the past few years had been caused in part by the Conservatives.

She claimed the decision from the Bank of England today would see the “average increase in mortgage bills” to be £240 a month.

Ms Olney said: “The difficulties we’ve had over the last three to four years is of course inflation has been pinging about all over the place, obviously there are factors like the pandemic, like the war in Ukraine, but there’s no doubt that the Conservative’s appalling mismanagement of the economy under Liz Truss has played a very large part in that.

“And people’s feelings and institutions and overseas investors and everybody else have been experiencing a great deal of uncertainty about precisely what it is this Conservative government plan to do.

“They’ve not helped themselves by constant changes in things like the tax rate and their plans for infrastructure”.

Asked if she agreed with the Bank of England holding interest rates, she said it was “not really for me to have an opinion”.

She added however: “I’m not disagreeing with you that 5.25% is a very difficult rate for people who are now renewing their mortgages”.

Chancellor Jeremy Hunt said the Bank of England's decision on rates was "finely balanced".

Asked if he had been hoping rates would be cut ahead of the general election, Mr Hunt said: "I welcome the fact the Bank of England's obviously thought about this very hard, they take this decision independently.

"And I would much rather that they waited until they're absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage.

"What we want is sustainably low interest rates, and I think what's encouraging is that the Bank of England governor, for the first time, has expressed real optimism that we're on that path."

Tom Swarbrick speaks to Liberal Democrat Treasury spokesperson

The Bank of England announced on Thursday it has maintained interest rates at 5.25% at its May Monetary Policy Committee (MPC) meeting, with governor Andrew Bailey signalling optimism that it may soon cut rates.

The committee voted by a majority of seven to two to keep rates unchanged. Members Dave Ramsden and Swati Dhingra voted to cut rates by 0.25 percentage points.

Mr Bailey said: "We've had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months.

"We need to see more evidence that inflation will stay low before we can cut interest rates. I'm optimistic that things are moving in the right direction."

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The MPC indicated it is still looking for more progress on factors including services inflation and wage growth, which have remained persistently high at about 6%, before cutting rates.

Inflation is expected to fall more than previously thought over the coming years, the Bank of England has projected, dropping below its 2% target to 1.5% in 2026.

Headline Consumer Price Index (CPI) inflation is expected to fall below the Bank's 2% target between April and June, but rise again to 2.6% in the second half of this year as the impact of recent drops in energy prices fades.

In the longer term, the Bank dropped its projections for CPI inflation to 2.25% for 2025 and 1.5% in 2026, down 0.25 and 0.5 percentage points respectively on February estimates.

The projection came in the Bank's May Monetary Policy Committee (MPC) report, which signalled optimism from recent falls in retail inflation.

The report said persistently high interest rates had helped push headline inflation down, as the MPC voted again to maintain rates at 5.25%.

The pound fell against the US dollar and euro after the Bank of England signalled growing support for an interest rate cut among policymakers.

Sterling fell 0.3% to 1.246 US dollars and was 0.2% lower at 1.161 euros.

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