Rishi Sunak and his chancellor Jeremy Hunt are pushing the UK economy into an even worse state than “arsonist” Liz Truss, Labour has said.
Shadow chancellor Rachel Reeves mocked the prime minister’s status as a “grown-up” politician – pointing to interest rates rising above the levels seen after Ms Truss’ and Kwasi Kwarteng’s disastrous mini-Budget.
Speaking to The Independent, Ms Reeves accused Mr Sunak of presiding over “managed decline” and insisted that his government would be to blame for the pain felt by millions facing huge extra mortgage costs.
The senior Labour figure also warned that repossessions could soon rise, as the average fixed mortgage rate deals soared close to 7 per cent.
“[Ms Truss] lit the touch paper,” said Ms Reeves. “But things are worse now. Rates now are at their highest in 15 years. Rishi Sunak came in and said, ‘Don’t worry everyone, the grown-ups are in charge now.’ But the grown-ups have got us into an even worse position that the arsonists.”
She added: “Rishi Sunak may think the grown-ups are in charge. But what that means is managed decline, because that’s what he delivered as chancellor and that’s what he’s now delivering as prime minister.”
According to latest figures from Moneyfacts, the average two-year fixed-rate mortgage is 6.75 per cent, while the average five-year fix has a rate of 6.27 per cent – outstripping the levels seen after the mini-Budget fiasco and the highest since the 2008 banking crash.
Ms Reeves and Labour’s shadow levelling up secretary Lisa Nandy held a roundtable with major mortgage brokers on Wednesday to hear how struggling households having to remortgage were dealing with payments of hundreds of pounds more each month.
“People who have bought their own homes are going to find it’s not affordable. It might be repossessions, it might be people selling up, it might be people having to work longer, but there’s a real-life impact from the Tory mortgage bombshell,” said Ms Reeves.
Shadow levelling up secretary Lisa Nandy and shadow chancellor Rachel Reeves
Mr Hunt last month agreed a plan with Britain’s big lenders to offer more flexibility over interest-only mortgage holidays and a 12-month repossession grace period.
But Labour has urged the government to make support mandatory for all lenders rather than voluntary, warning that some homeowners were “slipping through the net”.
Asked if Labour would back direct financial support for homeowners if the crisis gets worse, Ms Reeves ruled out the idea of government payments – warning that such moves could be inflationary.
“I’m more keen on the targeted [cost of living] support and doing it through the banks. I think you’re more likely to reach the people who need it most,” she said. “Also we are in an inflation crisis, and this isn’t the time to be having big spending exercises.”
Jeremy Hunt has agreed forbearance deal with big banks
As well as the impact of rising mortgage rates, the opposition also hit out at Mr Sunak’s government over the failure to set mandatory targets on housebuilding, warning that could lead to “hundreds of thousands” of people unable to afford a property.
Labour pointed to analysis by consultants Lichfields which suggested that abandoning mandatory targets for housebuilding would lead to an increase in 580,000 people forced to “sofa surf” by living with friends and family.
Speaking to The Independent, Ms Nandy said mortgage rates meant that some renters were seeing their dream of home ownership “going up in smoke”.
The shadow housing minister said: “People aren’t moving because there’s nowhere to move to. You’ve got a new problem approaching which is more first-time buyers who will be stuck in a private rented sector that is shrinking where prices are rising.”
First-time buyers are getting priced out by soaring interest rates
Ms Nandy has been criticised by some on the Labour left for ruling out rent controls to help those hit by the soaring payments demanded by private landlords – having previously said she was “attracted by the idea” of a freeze.
But the frontbencher insisted that Labour had “never committed to rent controls” and said it could push more buy to let landlords out of the market.
“Introducing rent controls at a time when house building is at its lowest level since the Second World War and the private rented sector is shrinking … would create a perfect storm that would almost inevitably leave people homeless,” she said.
Ms Nandy added: “It’s not an ideological objection to rent controls … but there is a real problem with doing that in the private rented sector at the moment.”
A Conservative Party spokesman said: “The Labour party have a £28bn borrowing plan which would hike up inflation and cause interest rates, and people’s mortgages, to rise. We won’t take any lessons from Labour while they’re advocating this irresponsible and dangerous borrowing plan that would hurt millions.”
They added: “We have acted immediately to ensure lenders are supporting homeowners as we work on our priority to halve inflation which will have the biggest impact in reducing people’s mortgage payments.”
