British banks pulled several mortgage offers from their virtual store windows at the beginning of this week. On the other hand, many British homeowners have gone on the heels of searching for a new fixed rate mortgage. The reason: great fear that the Bank of England, the Bank of England, will gradually raise interest rates in the coming months. Because the value of the British currency, the pound sterling, is under pressure. It even briefly reached an all-time low against the US dollar on Monday morning.
The reason is the announcement last Friday by the new Conservative government headed by Prime Minister Liz Truss to cut taxes drastically. That should boost Britain’s faltering economy. But it is rapidly increasing the national debt. Moreover, the actions mainly benefit wealthy Britons. There was immediate criticism. Finance Minister Kwasi Kwarting responded on Sunday by making an extra effort, promising more tax cuts.
swell in the sky
Economists call this neoliberal policy, based on additional loans, a “gamble” at a time when inflation is soaring. The Bank of England said on Monday it would not hesitate to raise interest rates as much as is necessary to “return inflation to its 2 per cent target over the medium term”. Inflation in the UK is currently around 10 percent.
Banks will pass a higher interest rate in the future on the loans they make, such as mortgages. According to Resolution, an interest rate increase to 6 per cent would cost a Briton with a €160,000 mortgage more than €1,100 a year. 1.8 million Britons have a mortgage that they must renew the interest rate on next year.
Moreover, according to the think tank, increasing the interest rate to 6 percent would increase the government’s costs of borrowing money by several billions a year. Because the government has to pay more for a loan. The value of British government bonds has fallen in recent days.
Huge experience
Criticisms are also heard from abroad. The German government described the British tax cut, which goes against central bank policy, as a “huge experiment”. Even US economist Larry Summers advised scrapping tax plans altogether. “The first step toward restoring trust is to stop saying untrustworthy things,” he wrote on Twitter on Sunday in response to Quarting’s comments.
It also resounds within the Conservative Party. Because if British homeowners are hit in the wallet, the party is in trouble. The opposition left-wing Labor Party led by a record 17 percentage points in Tuesday’s poll. Newspaper times Reports suggest that a “small but growing number” of Conservative MPs have internally urged Truss to resign via letters. That will be soon – she hasn’t been prime minister in four weeks.
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