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Antony Antoniou – Luxury Property Expert

The UK Mortgage Crisis: A Call to Pause Interest Rate Hikes

The UK Mortgage Crisis: A Call to Pause Interest Rate Hikes


In recent times, the prospect of another interest rate hike in the UK has raised concerns about the financial well-being of struggling households. Experts are urging the Bank of England to take a step back and reconsider their strategy amidst fears of a 13th consecutive rate increase. While higher interest rates are meant to curb inflation, they also pose a significant burden on homeowners, who could face substantial repayment hikes. In this blog post, we explore the potential consequences of continuing on this path and discuss alternative approaches that could mitigate the risks.

The Impending Rate Hike:

The Bank of England is set to impose its 13th consecutive interest rate increase, potentially raising the base rate from 4.5% to 4.75%—the highest level since 2008. Some analysts even speculate that the rate could reach 5%. While these steeper rates aim to control inflation, they will inevitably lead to significant financial challenges for tens of thousands of homeowners. Estimates suggest that, starting from 2024, homeowners may have to pay an average of £2,900 more per year.

The Impact on Households:

While many families have yet to experience the effects of these rate hikes due to fixed-rate mortgage deals, approximately 800,000 individuals will need to remortgage next year, potentially facing substantially higher interest rates. This situation increases the risk of a recession, which could have a ripple effect on the broader economy. Andrew Montlake of Coreco Mortgage Brokers warns that higher rates could drive up wages in an already tight labor market, thereby exacerbating inflation and hindering the Bank of England’s strategy.

An Alternative Perspective:

Oxford Economics, a global forecasting body, suggests that there is a possibility the Bank of England may raise interest rates by 0.5 percentage points, pushing them to 5%. However, Sir Howard Davies, former Bank of England deputy governor and current NatWest chairman, proposes a different approach. He recommends that the Bank waits for the previous rate increases to take effect before making any further adjustments. Sir Howard points out that the majority of today’s mortgage market consists of fixed-rate deals, resulting in a delayed impact on consumer spending when rates rise. This perspective challenges the need for immediate action.

Criticism and Concerns:

Lucy Allan, a Tory MP and chartered accountant, criticizes the response of those in power to the looming mortgage crisis. She highlights the potential dire consequences for the housing market, the economy, and individuals struggling to sell their homes. Allan expresses frustration with senior officials and ministers she believes are exhibiting complacency at the Bank of England and the Treasury. She even suggests that individuals should consider selling their homes while they still can.

The Complexity of Balancing Inflation and Recession:

Charlie Bean, a former Bank of England deputy governor, warns that interest rates could potentially reach 6%. He explains that the Bank faces a challenging task of reducing inflation without tipping the economy into a recession. The Bank has been criticized in the past for both delaying the start of interest rate hikes and continuing to implement quantitative easing for too long. Concerns are now rising that the Bank may compound its previous mistakes by overreacting and increasing rates excessively. In contrast, the US Federal Reserve recently decided to maintain interest rates after ten consecutive increases.

Government Response:

While some advocate for a major government intervention similar to the furlough scheme or the energy support package, ministers are resisting the idea. Housing Secretary Michael Gove believes that subsidizing home loans would contribute to inflation and harm the economy. One proposal under consideration by the Treasury is the reintroduction of tax relief on mortgage interest payments. Chancellor Jeremy Hunt has ruled out direct support but has urged lenders to assist borrowers in difficulty.


As the Bank of England contemplates yet another interest rate hike, concerns about the impact on struggling households and the wider economy continue to grow. Experts and politicians alike are calling for a reassessment of the current strategy, emphasizing the potential risks of proceeding without considering alternative approaches. Balancing inflation and recession is undoubtedly a complex task, and finding the right path forward requires careful consideration of the long-term consequences. It remains to be seen whether the Bank of England will heed these concerns and adjust its course or proceed with its planned rate hike.

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