Britain’s 14th successive rise signals a grim 2024 for the economy and for Rishi Sunak’s government
The surprise would have been if it had not happened. As a result, the markets – political markets as well as financial ones – were able to greet this week’s 0.25% increase in the cost of borrowing with something resembling a collective shrug of the shoulders. This 14th successive rise, taking UK base interest rates to 5.25%, had been largely priced in. A 15th is widely expected, so the price of money for businesses and mortgage holders is likely to go on rising to levels that have not been seen since before the financial crisis of 2008.
Ordinary borrowers are unlikely to be so phlegmatic. More than 1.4 million people hold variable rate mortgages. For them, the latest rise twists the screw even more tightly, piling on fresh costs to the hundreds of pounds that have been added to their monthly bills since rates began their steep climb from that distant 0.1% rate that still applied at the start of last year. Do not forget the additional deterrent effect of all this, not just in discouraging new customers from taking out new mortgages but also in the inevitable knock-on consequences for an increasingly sluggish construction sector.
