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You know the government is in trouble when even good news isn’t good news and more bad news than bad news. Still, Rishi Snak and Jeremy Hunt need all the help they can get and will be pleased that the Bank of England predicts the recession will be shorter and shallower than previously forecast. .
In fact, Hunt was so keen to demonstrate his close ties with banks that he actually welcomed the recent rate hike to 4%. “Inflation is a stealth tax and the biggest threat to living standards for a generation, so we support the actions of banks,” he said.
Prime Ministers rarely explicitly support raising interest rates (usually they avoid commenting directly on interest rates and focus on projections). Especially if such a raise is for millions of homeowners, renters, and businesses. From auto loans to business loans, credit cards to store cards, the pressure is getting tighter.
After a worrisome gap between the World Bank and the government during Liz Truss’ disastrous reign, Hunt is clearly keen to show that he’s “in step” in all its moves. But his support for rate hikes highlights the very problem the Truss started.
What Labor calls the ‘Conservative mortgage penalty’ is far from an abstract slogan. About 2.2 million people with variable rate mortgages have higher monthly bills. Mortgage rates have fallen from extraordinary levels in the wake of the not-so-small budget, but have seen a significant drop from £200 to £600 per month as households re-mortgage with new fixed-rate deals this spring. face the rise Moon.
Along with continued energy price hikes with the new fiscal year (lower than this winter, but still historically high), the eye-popping mortgage growth means that for many people, April really is the worst month. It means it will be a cruel month. The mortgage time bomb is set to explode just weeks after the next budget.
More broadly, 2022 may have been the year of rising food and energy prices, but 2023 will be a hellish year for housing costs.
As for the ‘generational rent’ of young people who can’t climb the housing ladder, their rents are already skyrocketing to pay for the previous interest rate hikes that landlords have taken over. The Resolution Foundation think tank reported last month that “housing stress” is being felt far more widely than it was at the height of the coronavirus pandemic.
But while the Conservatives may have already factored in their unpopularity among renters, it’s homeowners who are leaving Tory MPs across the country behind for fear of seats in the next election. of mortgage misery.
The public was so taken aback by the aftereffects of the trasonomics experiment that demand from first-time buyers has all but dried up. It slowed down to almost zero,” he said.
Home prices have fallen for the fifth straight month this week. Even if a full-scale housing crash were averted, many people could be left with negative capital, and many homeowners would simply feel poorer as a result. Low prices may encourage first-time buyers, but rising interest rates are a major deterrent.
One of the surprising stats from the last election was that 50% of those who voted Conservative paid off their home mortgage. This clearly shows just how many older people support the party, but it doesn’t mean they can lose all other votes.
What worries Conservatives is that this pain is spreading across the country. Home is the most affordable in the ‘redwall’ regions of the North of England and the Midlands, with mortgage payments as a percentage of take-home pay reaching their highest levels in his decade.
In London and the South of England, many are facing an astronomical rise in mortgages due to historically high property values. The “blue walls” of normally safe Conservative seats targeted by the Liberal Democrats have some of the highest house prices in the land.
In Dominic Raab’s now-last-minute Esher and Walton seat, the Liberal Democrats have worked out the numbers, and a typical person on a standard variable rate mortgage will see their annual payments increase by £3,000, or about £250 a month. I discovered that
Brexit regrets are already a factor in some of the ‘blue walls’. Today, Bank of England Governor Andrew Bailey admitted Brexit was one of the ‘shocks’ to hit economic growth (alongside the pandemic and the war in Ukraine), but it came sooner than expected. . “Long-term effects seem to emerge more quickly,” he said, referring to the fall in trade and business investment.
In November 2019, the World Bank calculated that Brexit would wipe out UK GDP by 3.25% in the ‘long term’, or about 15 years later. On Thursday, Bailey said: As it stands, its long-term impact would have been realized. ” For many Brexit critics, it is a ridiculous acceleration.
Labor is also pushing its mortgage message hard on wealthy constituencies such as Derbyshire and Plymouth. It was no coincidence that Shadow Prime Minister Rachel Reeves was campaigning at Finchley and Golders Green today.
The brutal truth is that the Tory base of support in central England was blown last fall as the Truss mini-budget turned into a fiasco. From that moment on, the party plummeted in the polls and hasn’t really recovered since. will be seen by many as an ongoing story of Tory incompetence.
It’s a relief to all of us that the economy won’t completely collapse this year, but the Conservative poll collapse has already happened and seems to be going on for quite some time so far.
The prime minister wants to take full credit for lowering inflation this year, but voters will find out if he takes no responsibility for the spike in inflation in the first place. Interest rates and inflation may peak this year, but it will be difficult to get out of the Tory unpopularity trough.
There are also more fundamental political weaknesses exposed by the Bank of England. We expect the recession to be shallower, but growth will only be 0.7% per annum after the downturn. Truss’ “land of dreams” is likely to become a stagnant snack country.
A depressed Conservative MP recently confessed that the growth of anemia in the UK over the past 12 years will not be wiped out easily. “You can’t brush feces,” they said. If the economy has a “soft landing,” it may be soft.