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    • Bank of England mortgage warning as governor blames Rachel Reeves | Personal Finance | Finance
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    Bank of England mortgage warning as governor blames Rachel Reeves | Personal Finance | Finance

    Harry Posted on

    The governor of the Bank of England blamed the election of Donald Trump and the UK budget for recent increases in fixed-rate mortgage costs.

    The cost of borrowing between financial institutions, called swap rates or the swap curve, has risen due to the US presidential election and the Chancellor’s decisions, Andrew Bailey told MPs on Tuesday morning (November 19). Rachel Reeves.

    In his speech to the Treasury Select Committee he suggested the situation in the US where financial markets expected higher inflation. interest rates It seems to be the most important factor in the increase in mortgage loan prices in the UK after Trump’s election.

    He suggested that decisions in the budget, such as increasing the National Living Wage and increasing National Insurance payments made by employers, also increased inflation forecasts, which in turn increased inflation forecasts. interest rates above previous expectations.

    Mr Bailey’s comments came in response to a question from Labor MP Darlington Lola McEvoy, who expressed concerns that the cost of fixed-rate mortgages had risen in recent days despite the Bank of England cutting the base interest rate by 0.25 per cent. It rose to 4.75 percent on November 7.

    The MP said: “We saw this last week. interest rates came down mortgage rates have actually increased.

    “This will have a huge impact on my constituents in Darlington and all our constituents across the country who are hard-working and struggling to adapt to a challenging climate.”

    He asked: “What went into this? Is this what you expected to happen and what are your feelings about why this happened?”

    In response, Mr Bailey said: “The majority of mortgages in this country, quite a large majority at the moment, are fixed rate mortgages, they are not variable rate mortgages, so they are priced on the market clearance curve over the term.” mortgage.

    “There are two things that move the curve. “There was a reaction to the British budget, and secondly, there was a strong reaction to the US presidential election.”

    It was asked whether US election Stating that it had more of an impact than the UK budget, he said: “They both had an impact… but if you take that week, up until the Friday of that week, I would say, that was what the UK was expecting.” US election and then of course US election (he) took more action himself.

    “By the way, it’s not unusual for our interest rates to move around the U.S. curve, that’s not unusual at all. For example, we saw this a lot this year.

    “I think there has been a strengthening of the US curve lately.”

    The comments of such a senior figure show the extent to which the British economy and British families are now dependent on the decisions made by Donald Trump and their impact on trade, financial markets and commerce. interest rates.

    This will put pressure on my master. Keir Starmer and Rachel Reeves are trying to deliver on promises to boost the UK’s growth at a time when the Trump administration is talking about imposing tariffs on imports from countries around the world, potentially including the UK, unless some exemptions are agreed to.

    Looking ahead, Mr Bailey said the Bank now expects a series of gradual cuts to the Bank of England base rate over the next 12 months, with some suggesting a 1 percentage point cut to 3.75 per cent by Christmas next year.

    However, he stated that there is great “uncertainty” about how the UK economy will perform in the coming months and what inflation will be like. He said increases in wages and National Insurance taxes for employers could lead to higher prices or reductions in employment, an issue he warned retailers and the hospitality industry were concerned about.

    Citing a letter from the British Retail Consortium to Reeves on Tuesday, he suggested there was a “risk” that these changes could be transmitted mostly through lower employment.

    He added: “The Living Wage is a very prominent topic of discussion… I would say it is clearly on companies’ minds.”

    In a letter to the Chancellor signed by 81 chief executive officers, the British Retail Consortium estimated the total annual cost to retailers of increases in National Insurance and the National Living Wage, as well as a new packaging tax.

    BRC said: “It will not be possible for any retailer, large or small, to absorb such significant cost increases in such a short time frame. “The effect will be to increase inflation, slow wage growth, cause store closures and reduce jobs, especially at the entry level.”

    Mr Bailey said it was too early to tell how the next US administration’s policies would affect Britain, given “we don’t know exactly what their intentions are”.

    He told MPs the UK should not have to choose between closer cooperation with the US or the EU, saying: “Free trade is not about choosing one area over another . . . We should approach every part of the world as places we trade with.”

    This is post-Brexit To reach the best possible agreement with the EU. “I have a hard time understanding people who say we should implement Brexit “In the most hostile way possible,” he said.

    Harry
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