The Bank of England has held its base rate at 3.75 percent, bringing an abrupt halt to the run of cuts that had been easing borrowing costs down from a sixteen-year high. The message to homeowners and businesses hoping for relief is blunt: do not count on it. The cutting cycle is over, and the markets are now openly talking about the rate going up again later this year.
The Cutting Cycle Is Dead
For a while, the direction of travel was downward, and households braced for some relief on their mortgages. That relief has now stalled. The Bank's Governor has warned that the outlook involves "difficult judgements" — central banker language for a government that has made his job harder. When the Bank stops cutting and starts hinting at hikes, it is telling you the economy is not getting better.
A Bank Boxed In by Labour's Choices
Why is inflation proving so stubborn? Because Labour's decisions have kept the pressure on. A tax-and-spend budget, a hike to employer National Insurance that pushed up the cost of doing business, and a borrowing habit that spooks the markets — all of it feeds through into prices. The Bank is left holding rates high because the government will not get a grip on its own spending.
Ministers like to pretend interest rates are nothing to do with them. They are wrong. A government that borrows heavily and taxes recklessly forces the Bank to keep money expensive. The cost of that choice is paid by everyone with a mortgage.
Mortgage Holders and Savers Caught in the Middle
Every family coming to the end of a fixed-rate deal this year now faces remortgaging at a rate that is not coming down — and might be going up. That is hundreds of pounds a month that does not go on food, clothes or a family holiday, but straight to servicing debt. Meanwhile, with unemployment climbing towards 5 percent, the security people need to weather higher costs is draining away. Squeezed from both sides, working families are running out of room.
What Reform UK Would Do
Reform UK would bring discipline back to the public finances and confidence back to the economy. We would cut wasteful spending, lower the tax burden on workers and businesses, and stop the reckless borrowing that keeps interest rates high. Sound money is not a luxury. It is the foundation of every family's security.
Labour borrowed and taxed its way into this corner. The Bank of England has just confirmed the bill. Reform UK would do the hard work of getting Britain out of it.