Bank of England’s Money-Printing Spree Causes Surge in Debt Costs, Burdening Taxpayers

Homeowners burdened with debt are feeling the impact of rising interest rates, as the average rate for a five-year fixed-rate mortgage surpassed 6% on Tuesday. According to data company Moneyfacts, borrowers seeking a five-year home loan can now expect to pay an average rate of 6.01% – the highest it has been since November of last year, when the mortgage market was still reeling from the effects of Liz Truss’ mini-Budget.

This increase in rates means that someone taking out a typical £200,000 loan would need to pay an additional £246 per month compared to those who secured a loan in July of last year, when the average rate for a five-year fix stood at 3.89%. Over the course of the loan, this amounts to an extra £14,760.

The surge in mortgage rates can be attributed to much higher-than-expected inflation data released in April, which caused expectations for future borrowing costs to skyrocket. Since then, lenders have been compelled to make even larger increases in rates due to higher-than-expected wage data and inflation data in May.

In the span of just six weeks since the end of May, the cost of securing a five-year fixed-rate mortgage has risen by a full percentage point. Consequently, compared to those who locked in their mortgage rate a mere six weeks earlier, buyers will now have to pay an additional £1,440 in annual interest.

Responding to this report, a Treasury spokesperson stated, “This report acknowledges that various shocks, including the pandemic, have led to increased borrowing, debt, and inflation worldwide. The NAO commends our effective debt management, which has maintained market confidence. However, the most effective way to ensure sound economic management and benefit the public is to adhere firmly to our plan of halving inflation, fostering economic growth, and reducing debt.”