Mortgage Rates and the Bank of England

Treasury – in the House of Commons on 11th October 2022.

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Photo of Laurence Robertson Laurence Robertson Conservative, Tewkesbury

What recent discussions he has had with the Governor of the Bank of England on rising mortgage rates.

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury

The Chancellor speaks regularly to the Governor of the Bank of England on a wide range of matters. As my hon. Friend knows, the Bank of England sets monetary policy, including interest rates, independently of Government.

Photo of Laurence Robertson Laurence Robertson Conservative, Tewkesbury

I thank the Minister for that response. Obviously, the world situation is the biggest cause of the rise in interest rates, but that rise is having a detrimental effect on mortgage payers and risks negativising the welcome help that the Government have provided through energy costs and tax cuts. Will the Chancellor and Ministers meet more regularly with the Bank of England to co-ordinate policy a little more closely?

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury

I thank my hon. Friend for his question. He is a passionate advocate in this place for his constituents. The Chancellor and I regularly meet the Bank of England and all the individual lending banks in the UK. My hon. Friend knows that interest rates have increased in every major economy, despite what the Opposition may claim. That is why it is so important that we provide help with energy costs and cutting taxes.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

Surely Ministers must now apologise for the chaos that their mini-Budget, with its £45 billion of unfunded spending commitments and tax cuts, caused to the bond markets. Is it not now a fact that there is a Tory premium on every interest rate rise for every borrower in this country? They are not going to forget that when the election comes.

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury

I think we all understand that there is a clear divide in this House. The Government are supporting growth, providing support for energy bills, giving the economy the confidence and certainty that it needs this winter, and bringing forward supply-side measures that will boost the economy, not being on the side of striking workers who are bringing this economy to a halt.

Photo of Pat McFadden Pat McFadden Shadow Chief Secretary to the Treasury

With your permission, Mr Speaker, I wish to send my condolences to the families of all those killed in the tragic accident in Creeslough, County Donegal, last week. My parents came from quite nearby. It is a beautiful place with a close community, and they are very much in our prayers right now.

I welcome the Minister to his place. I am sure that he and the Chancellor’s team wanted their first Budget to be remembered, perhaps even studied in years to come. Well, they have certainly achieved that ambition. Two-year fixed mortgage rates are above 6% for the first time since 2008, and they have risen sharply since the Chancellor’s mini-Budget. Everyone coming off such a rate will face much higher payments over the coming year, possibly hundreds of pounds a month more. Why should people who have worked hard to buy their own home pay the price for the Government’s mistakes?

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury

I add my comments and thoughts to those on the incident in County Donegal last week.

We have already talked about our comprehensive energy support package, which will help not just every household this winter and prevent the uncertainty of energy bills that were forecast potentially to reach £6,500 per home, but help businesses. The Government are on the side of businesses and keen to improve the supply side of our economy, so that we can grow to create the tax revenues for our high-quality public services.

Photo of Pat McFadden Pat McFadden Shadow Chief Secretary to the Treasury

This morning, the Bank of England made a further intervention in the markets, warning of

“a material risk to UK financial stability”.

That risk comes directly from the Chancellor’s mini-Budget two and a half weeks ago. How much more will Government borrowing cost next year as a result of the rising gilt yields since the Chancellor’s statement on 23 September?

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury

As I have already observed, we are seeing interest rates rising in every major western economy. When Opposition Front Benchers are finished with their British exceptionalism, perhaps they will lift their eyes and notice that. What is more important is that we are protecting consumers and households through the difficult winter months ahead, and cutting taxes. Those are measures that Government Members support and Opposition Members oppose.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

Today, the International Monetary Fund observed that the Chancellor’s unfunded tax cuts have complicated the fight against inflation. As a result, the Bank of England is expected to increase the base rate to levels not seen since 2008. Families have already struggled with increasing energy prices, Kantar says that grocery inflation stands at 13.9%, and Santander is preparing for increased mortgage defaults. What is the Minister and his Treasury team doing to tackle the absolute chaos that they have created?

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury

I understand that the nationalist party likes to talk the country down at every opportunity, but the reality is that we are taking the action that we need, tackling the supply side, tackling the strikes that are grinding down the economy and building the energy supply that we need to help strengthen our economy and our currency. The hon. Member’s party opposes nuclear and opposes more oil and gas exploration.