So now we are told we have a ‘mortgage crisis’ to go with the ‘cost of living crisis’. And indeed we do. In response to the Bank of England’s rate rises, mortgage lenders have increased interest rates three-fold over the last two years. Households on variable-rate loans will suffer the most immediate pain. But there are also 2.5 million homeowners refinancing their fixed-rate mortgage deals by the end of next year, and they are expected to be forced to pay, on average, £3,900 a year more in interest.
This crisis is very much the responsibility of the Bank of England. Sure enough, the origin of the recent rise in prices is in part a consequence of factors beyond the Bank’s control. But their attempt to blame inflation entirely on those factors, whether foreign wars, firms' pricing strategies, or whatever else, is certainly not to the Bank’s credit. They should have accepted long ago that monetary policy – and the increase in the quantity of money which the Bank orchestrated – is a very significant contributor.
But there is another factor to consider. Since inflation started, the Bank of England has downplayed it. Not only did the Bank deflect blame, but it was a consequence of assorted special circumstances and idiosyncratic characteristics of particular markets, and not really inflation at all; or it was real inflation but would soon be gone. In July 2021, for example, Governor Andrew Bailey said that inflation would be “transient”. Even now, despite a slight air of panic in the most recent interest rate decision, we are told to expect a speedy restoration of price stability.
One can only wonder how many of those with new mortgages that they can no longer afford took them on in the last couple of years because the Bank has used all its authority to convince them is was safe. Those people, sadly, are personal victims of the Bank of England’s policy failures.
