‘Bank bigwigs losing plot on interest rates’
Ex rate-setter in call for base cuts
THE Bank of England has been accused of “losing the plot” by preparing to hike interest rates when millions are in the grip of a cost-of-living crisis.
With the country on the brink of a recession, former Bank rate-setter Prof David Blanchflower singled out Governor Andrew Bailey, saying: “I think he is a complete disaster.”
Experts predict the Bank’s Monetary Policy Committee will today raise its base rate from 1.25% to 1.75%, its biggest hike in 27 years.
The Bank is trying to use higher borrowing costs to cool runaway inflation.
But the move was slammed by ex-MPC member Prof Blanchflower, who said he would vote to cut rates instead as households were already reining in their spending, with consumer confidence plunging.
“How is raising rates helpful in that regard?” he asked the Daily Mirror. “It will just cause more bankruptcies and cause more firms to lay off staff.”
Prof Blanchflower also criticised bank bigwigs for warning of higher rates, leading to mortgage lenders upping theirs.
He said the MPC was made up of civil servants and academics who all live in London.
“They have no experience of what happens in the mean streets of Huddersfield,” he said. “When I was on the MPC, I was the only one who hadn’t been to Oxbridge. What to do they know about the daily lives of Daily Mirror readers? They have no experience of that.”
The predicted rise would most obviously hit two million borrowers with variable rate mortgages.
Credit app Totally Money and the website Moneycomms said for someone with a typical £150,000 mortgage, it would add £37 to their monthly repayments, or £444 a year.
Property website Rightmove calculated if rates rise by 0.5%, new firsttime buyers would see their monthly mortgage payments increase to an average of 40% of their gross salary, a level not seen since 2012.
The Lib Dem’s Sarah Olney said: “The mortgage ticking time bomb could prove disastrous for families and pensioners facing unimaginable energy bills this winter.”