Anyone who wants to know what the abstract message of a higher prime rate means in everyday life would do well to talk to people like Mary Lorimer these days. We met the 59-year-old Briton with her green handbag in southwest London on her way to her bank.
I no longer know how to pay my bills. I shower only at night or on weekends when the electricity is a bit cheaper. Everything is getting more expensive and interest rates are going up now. How am I supposed to pay for that? ”
The retail employee is just one of the tens of thousands of homeowners trying to talk to their bank these days. Anyone who takes out a new two-year mortgage in London these days has to calculate an interest rate of six percent. According to the Institute for Fiscal Studies, an economic institute in London, more than a million homeowners could lose a fifth of their disposable income due to rising interest rates.
Is the textbook wrong?
People who own a home tend to be among the wealthy in Switzerland. Not so in the UK. Tenants are a minority in the UK. Almost 70 percent of Britons own a home; They are often financed with short-term mortgages of one to two years.
Mortgage interest rates are currently rising all over the world, but more significantly in the UK than in France, Germany, Ireland or Belgium. Despite this, the government acts as if inflation and interest rate hikes are a natural phenomenon, like the weather, over which it has no control.
Prime Minister Rishi Sunak declared that it is now important to keep calm and everything will be fine. In order to reduce inflation, the money supply must be reduced and thus the interest on loans must be increased. This is his fiscal policy message, simply put. This may be true according to an economics textbook, but people’s interests are not some kind of abstract parameter of a mathematical equation.
The government can be punished
Especially when the bill does not increase at the end of the month. So more and more homeowners are asking for help from the state. But the British Chancellor of the Exchequer, Jeremy Hunt, rejects the idea. The only thing he can offer the British after a crisis summit with British banks last Friday is twelve months of grace. “The banks have assured me that there is a 12-month grace period before vacating the house,” Hunt said.
Cold Solace for Troubled Homeowners. Experts assume that 1.5 million Britons will have to renew their mortgages by the end of the year and could reach their financial limits in the process. Many of them see the rise in interest rates not as a mere fluke, like a rainy Sunday, but as a result of government incompetence. Preliminary polls show this could be a heavy political burden for the Conservatives in the next election year.
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