It is only when we see this kind of uncertainty and weakness that we can start to relax.
Stage Three is the much-needed cut in interest rates that people had hoped would begin before Christmas. Here’s why it could take longer.
Once upon a time, most mortgages were on variable rates, so interest rate changes quickly fed through to the economy a month later.
However, a decade of ultra-low rates meant most borrowers took fixed-rate loans. These have insulated households from the restrictions of higher rates and, rather like Wile E Coyote, they carried on blithely walking on air. Now they are starting to look down.
By the end of 2026, almost all households with a mortgage will have moved to a higher rate, and, unless banks extend their terms, are likely to end up with annual mortgage bills that are £2,000 higher on average compared to December 2021.
A large slug of this falls due in 2024, when a general election is likely. But since the government already expects to lose this, I won’t have to deal with much harassment from Number 10.
Anyway, my job contract doesn’t expire until 2028, so I am quite relaxed. It’ll be a different lot of politicians by then.
I hope you have found this little fireside chat to be helpful, I know I have. There are some things one simply cannot say at a Bank of England press conference.
But if you have found any of it unpalatable, well, I’m sorry.
Lots of love,
The Governor
*Was this really generated by a chatbot? Or by Page himself? Is Martyn Page himself a robot? In this day and age, who really knows?
