Critics yesterday slammed Rishi Sunak‘s government, as the “living nightmare” of high inflation and soaring mortgage rates fuels mounting fears of a tidal wave of repossessions.
With another Bank of England rate hike predicted for today – sparking even more homes misery – the Tories were accused of being out of ideas and clueless about people’s financial predicament.
Figures yesterday revealed no drop in living costs last month.
The consumer prices index measure of inflation remained at 8.7% in May. Experts had predicted a fall. And the UK’s debt mountain reached the highest levels since 1961.
Core inflation, which strips out things such as food and energy and is closely watched by the Bank of England, defied forecasts by rising to 7.1%, its highest since 1992.
Food price inflation stood at 18.3%, although it eased a bit.
Also up were everything from secondhand cars and computer games to air fares, package holidays and concerts – the last thought to be affected by Beyonce ’s UK gigs. While average wages are rising, they are still outstripped by inflation, resulting in a real terms pay cut.
Millions of households are set to pay the price for what opponents say are failures by the Tories and the Bank of England to tackle inflation.
Economists have pencilled in a rate hike from 4.5% to 4.75% today – with a leap straight to 5% not ruled out.
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Some say the Bank could yet pause rates because of the pain caused by 12 previous hikes At Prime Minister’s Questions, Mr Sunak was warned people face a mortgage catastrophe.
Labour leader Keir Starmer laid into the PM, saying: “After 13 years of economic failure across the country, people are paying the price of uncosted, reckless, damaging decisions by the Tory Party.
“And even now, as mortgages go through the roof, the Prime Minister is planning to wave through honours and peerages for those who caused misery for millions.”
Labour claimed families are paying over £1,000 a year more for food than in 2020/21.
Jon Richards, assistant general secretary of the union Unison, said: “Higher prices, soaring rents and sky-high mortgages are a living nightmare. Government ministers don’t have a clue about the financial worries of most people.”
Gary Smith, general secretary of the GMB union, said yesterday’s figures “show the Government is out of ideas on the economy.”
Lib Dem Leader Ed Davey urged the Government to act to prevent a “tidal wave” of home repossessions.
Analysis by the party revealed 1,250 homeowners have had to hand back the keys after falling behind on repayments since failed PM Liz Truss ’s disastrous mini-Budget last September.
Repossessions jumped 50% in the first three months of this year but remain down on pre-Covid levels.
The Government has refused to provide new help for struggling mortgage borrowers. Chancellor Jeremy Hunt insisted: “We won’t be pushed off-course. If we’re going to help families, if we’re going to relieve the pressure on people with mortgages, on businesses, we need to squeeze every last drop of high inflation out of the economy.”
But it came amid the warning of a “ticking mortgage time bomb”, as borrowers face paying hundreds of pounds a month more when their cheap deals end.
The Institute for Fiscal Studies estimates 1.4 million mortgage holders – half aged under 40 – will have their payments rise by at least 20% of their disposable income if rates stay high. The average two-year fixed rate mortgage rose from 6.07% to 6.15% yesterday, said industry experts Moneyfacts, up from 2.65% in March last year.
Trade body UK Finance says 800,000 fixed-rate deals end in the second half of this year and 1.6 million by the end of next year.
Renters, who outnumber mortgage borrowers, risk being hit if landlords pass on their own higher home loan bills.
A third of buy-to-let mortgages – more than 650,000 – are impacted by the Bank’s rate changes.
Debt charity StepChange revealed 45% of mortgage holders, equivalent to 6.9 million people, have struggled with bills and credit commitments in recent months. Mr Hunt is due to meet mortgage lenders tomorrow.
A spokesman for the Financial Conduct Authority said: “We’ve been working with lenders for many months to ensure they provide tailored support.”
The Office for National Statistics revealed the national debt had hit nearly £2.57trillion. It was the first time since 1961 the pubic sector debt mountain was greater than the economy. Public sector borrowing doubled in May, the ONS said.
