Rates may hit 7.5% as mortgage holders dread rises
The Bank of England’s Monetary Policy Committee (MPC) has come under withering fire from nine leading economists as inflation threatens to spiral out of control and wreck the Chancellor’s vision of a stable economy.
In an open letter, the nine economists condemned the MPC for failing to halt the surge in inflation and endangering the mortgages of many homeowners as interest rates are raised to try to deal with it.
The Consumer Price Index measure of inflation – the Government’s inflation benchmark – has got up to 3.1%, the highest level since the Bank of England got control of setting the interest rate 10 years ago.
“Inflation is back and it’s going to get to 4% by the middle of next year,” said Tim Congdon, a former Treasury worker who was one of the nine signatories to the letter.
“It’s not as bad as earlier cycles, but it’s nevertheless bad and it’s going to end in the usual way. Rates will go to 6.5% and may have to reach 7.5%,” he added.
Mortgage holders Paul and Clare Hutchens of Croydon in south London said: “We took out a standard variable rate mortgage six years ago and at first the rate went down and we were paying a reasonable amount each month for the loan.
“But the prospect of a 7.5% rate fills us with dread and we will be extremely pushed to cover the repayments if that happens.”