Money&Co chief Nicola Horlick blasts latest BoE rate hike
Money&Co chief executive Nicola Horlick has criticised the Bank of England’s latest decision to increase interest rates, arguing that it will result in higher mortgage costs and, in turn, higher wage inflation.
The central bank raised the base rate to 4.25 per cent last week, in a bid to bring down inflation which currently sits at around 10 per cent. The Bank’s target for inflation is two per cent.
Horlick, who runs the peer-to-peer business lending platform, warned that the increase to the base rate will increase “the likely shock” when fixed mortgage terms come to an end.
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“When combined with high energy costs and increases coming through on everything from broadband to pasta, this is going to have a very marked effect on the British consumer,” she said in an article for the i newspaper.
She said that higher rates could even end up worsening inflation, contrary to the Bank’s aims.
“One of the big problems is that, as higher mortgage costs hit, there will be even more pressure from workers on employers to increase wages, perpetuating the inflation cycle,” she said. “And inflation with negative growth is not a good place to be.”
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This wage inflation could then prompt the Bank of England to hike rates even further, making a recession more likely, she said.
“The economic future for Britain looks pretty bleak currently,” she added. “I don’t envy the members of the Monetary Policy Committee at the Bank of England and, on balance, I suppose they had no choice other than to raise rates today. However, I strongly feel that they need to take stock before their next meeting and remember that fixed rate mortgages will soon start coming to an end creating a further and unwelcome financial burden for millions of borrowers.”
Fresh Bank of England data, released today, showed that mortgage lending fell from £2bn to £700m in February. Excluding the pandemic, this is the lowest level of mortgage borrowing since April 2016.