Ms Hewson noted that despite the base rate holding steady all year, “lenders have been making their own moves and mortgage rates have shot back up to three-year highs as markets price in higher energy costs.”
Three of the nine members of the Bank’s Monetary Policy Committee voted for a rise at the last meeting, and with the economy continuing to show resilience, the case for holding firm is weakening.
Markets are currently pricing in the possibility of rates climbing as high as 5 per cent by next winter, a prospect that would heap further strain on already stretched household budgets.
The OBR’s forecast that inflation could approach 4 per cent in early 2027 suggests the Bank may have little room to ease off.
Beyond interest rates, frozen income tax thresholds are quietly compounding the problem. Because lenders assess affordability based on take-home pay, fiscal drag effectively reduces how much borrowers can access, even when their salaries increase.
Unfreezing the personal allowance, Mr Lane argued, would do more to improve mortgage affordability than any headline housing policy.