Labour warns of “unbearable burden” as mortgage costs set to rise by £600 a year

Abena Oppong-Asare MP has warned that households will face an “unbearable burden” after analysis by Labour found that the 0.5% interest rate rise would see repayments on a variable rate mortgage for the average house rise by £600 a year.

Commenting after the Bank of England announced the largest rise in the cost of borrowing for 27 years today, the shadow exchequer secretary to the Treasury said “the huge financial impact on households as a result of Tory failure is unforgivable”.

“Families are already stretched, and this is yet another added unbearable burden. People should not have to live in constant worry about the fact their bills are rising to levels far above what their wage allows for,” she argued.

“Labour would help struggling households by removing the tax breaks that are subsidising oil and gas producers and using that money to help people now, including by cutting VAT on energy bills.

“And with our climate investment pledge and plan to buy, make and sell more in Britain, a Labour government will build the strong, secure and fair economy we need.”

Rachel Reeves unveiled the party’s pledge to “make, buy and sell more in Britain” last July and the Shadow Chancellor committed Labour to investing £28bn for each year of this decade in capital investment aimed at transitioning towards a green economy at the last party conference.

The Bank of England announced today that it is raising interest rates by half a percentage point. According to the analysis by the Labour Party, the increase will mean a 75% loan-to-value variable rate mortgage for the average house in the UK will see repayments rise by over £600 a year.

The bank predicted that inflation will rise even higher in the coming months, to around 13%, largely as a result of increases in the price of gas. It projected that the UK will enter recession from the fourth quarter of the year and that real household post-tax income will “fall sharply in 2022 and 2023”.

The Bank of England also said the price cap was on track to hit £3,500 by October but one analyst, Martin Young at Investec, has forecast that household energy bills could climb above £4,000 within a year. He estimated that the energy price cap would reach £3,523 in October and £4,210 in January.

Commenting on the announcement, Rachel Reeves declared that the Bank of England’s decision to raise interest rates for a sixth time in succession is “further proof” that the Conservatives have “lost control of the economy”.

Chancellor Nadhim Zahawi described the forecasts as “concerning for many people”, adding that addressing the cost of living is a “top priority” and arguing that the government is “taking important steps to get inflation under control”.