Tories turn on Bank of England over mortgage crisis as interest rates to be hiked again

22 June 2023, 02:33

Tories have turned on the Bank of England over interest rates
Tories have turned on the Bank of England over interest rates. Picture: Alamy

By Emma Soteriou

Senior Tories have turned on the Bank of England over the mortgage crisis as interest rates are due to be hiked again.

Chancellor Jeremy Hunt’s economic advisers are among those to have turned on the Bank of England over its failure to curb inflation.

The Bank is due to raise the interest base rate by 0.25 percentage points on Thursday, taking it to 4.75%, with some commentators even raising the possibility of a more aggressive increase of 0.5 percentage points.

The move is expected to pile further pressure on mortgage-holders, with warnings that 1.4 million will lose at least a fifth of their disposable income in additional payments.

It comes after figures released on Wednesday showed that inflation stalled at 8.7 per cent in May despite rate hikes.

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Andrea Leadsom, a Tory former Treasury minister, said the Bank was doing "too little, too late" while a senior adviser to Mr Hunt said it had "misjudged" the inflationary threat.

And former Business Secretary Sir Jacob Rees-Mogg said the Bank was "inflicting unnecessary pain on the economy because of its earlier failings".

PM Rishi Sunak, due to speak on Thursday at an economy-focused PM Connect event in the south-east of England, will look to reassure workers about the pressures being caused by rising prices.

The Conservative Party leader will tell business figures that halving inflation is his administration's "number one priority" and that he wants to "get back" to the target of inflation being at 2% - less than a quarter of what it stood at last month.

In pre-briefed comments, Mr Sunak is expected to say: "I feel a deep moral responsibility to make sure the money you earn holds its value.

"That's why our number one priority is to halve inflation this year and get back to the target of 2%. "And I'm completely confident that if we hold our nerve, we can do so."

Read more: Rishi Sunak accused of having 'no backbone' and showing 'cowardice' for abstaining from Partygate vote

Read more:Chancellor says Government will ‘stick to its guns’ as UK inflation stays at 8.7%

Mr Hunt said on Wednesday that the Government will "stick to its guns" and insisted patience was needed for the Bank's rate rises to curb inflation.

The Treasury chief has so far dismissed suggestion that ministers could intervene to assist homeowners with rising mortgage rates.

Tom Swarbrick on interest rates as he calls on Rishi Sunak to explain 'confidence' in plan

But Labour has accused the chancellor of standing by as millions suffer by taking the softer approach of just asking lenders to go further in supporting struggling borrowers.

The Opposition is urging the Government to instead compel lenders to allow borrowers to temporarily switch to interest-only payments or lengthen their mortgage period.

Banks would also have to wait at least six months before starting repossession proceedings under a five-point plan set out by shadow chancellor Rachel Reeves on Thursday.

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