Mortgage payers and business owners have been warned that higherrates are here to STAY despite the interest rate cut from the Bank of England last week. Bank documents show policymakers expect that level to be about 3.5% in three years’ time, with mortgages staying around the 4.5 per cent and five per cent level.
Claire, a maternity support worker from Portsmouth, told the Guardian newspaper her family moved into their house in January 2022 on a 1.99% two-year fixed repayment mortgage, paying £1,042 a month. Since then their mortgage payments have risen by more than £500 a month to £1,596.90.
“It has caused a lot of worry and stress,” she said. Andrew Bailey wants to dispel any thought that interest rates might go back to the old “normal”. He said: “It is much more likely, it seems to me, that we are going back to a world where we will be somewhere around whatever the neutral rate turns out to be, which, it is reasonable to say, is lower than where we are at the moment but higher than when we started raising rates [in 2021].”
“We hope things will improve and we can gain some financial control again, but it’s going to be a long two years before we get there. I’m concerned if things don’t improve the only option will be selling up,” Claire said. Dario Perkins, an economist at the consultancy TS Lombard and a former UK Treasury official, said “central banks are planning to make small adjustments in rates and see whether events force them to do more.”
Events include the likes of the US Presidential Election with Donald Trump and Kamala Harris running for office. Lorenzo Codogno, a former chief economist at the Italian central bank, said: “Restrictions on trade are the immediate threat, especially if Trump wins the US election. But longer term, a lack of skilled workers could push up wages and inflation.”
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