Ministers blame Bank of England for soaring mortgage costs

Cabinet ministers believe the Government is being unfairly held responsible for rising mortgage rates, with senior figures privately blaming the Bank of England (BoE) for the increases.

Ministers are privately accusing the BoE of being too slow to tackle inflation. They claim that the alleged sluggishness has already led to significant rises in mortgage costs in anticipation of an expected jump in interest rates next month – when several members of the Cabinet said they believed the BoE would effectively make up for lost time.

Since Ms Truss entered Downing Street, ministers have refrained from even private criticism of the BoE. The Prime Minister was accused of jeopardising its independence after suggesting during the Tory leadership campaign that it could have done more to tackle inflation earlier in the year and pledging a review of its formal mandate from the Government. Kwasi Kwarteng, who was later appointed chancellor, pointed out that the BoE had consistently missed its mandated target to keep inflation at 2 per cent.

‘Hasn’t put up rates as it should’

But, amid rising mortgage rates and a further expected jump in interest rates next month to tackle inflation, one member of the Cabinet made it clear that ministers had ongoing concerns, telling The Telegraph: “The Bank of England hasn’t put up interest rates as it should.” A second Cabinet minister expressed similar criticism, pointing out that the BoE’s gradual increase in interest rates since the start of this year had been significantly outpaced by rises in countries such as the US.

A third Cabinet source also said that “the Bank of England was behind” in raising interest rates, leading to concerns that its increases in the base rate since January had been too small, meaning that more dramatic action was now likely when the Monetary Policy Committee (MPC) meets on Nov 3.

The cost of a five-year fixed-rate mortgage exceeded 6 per cent for the first time in more than a decade after last month’s mini-Budget. Ministers are concerned that Ms Truss will be entirely blamed for further rises in mortgage rates.

On Saturday, a YouGov poll found that more than half (52 per cent) of voters already blame the government for rising mortgage costs, with only 5 per cent blaming the BoE.

The BoE is expected to raise rates at its next meeting in November by as much as one percentage point.

A government source said: “The hope is that we’re not blamed. We have to keep pointing to international comparisons like the Fed. Wealthy countries are all facing the same problems, if not worse than Britain, on inflation, interest rates, fiscal loosening, monetary policy and a lack of productivity.” US mortgage rates jumped to a 16-year high of 6.75 per cent last week.

Fears opposition parties will capitalise

Ministers fear that opposition parties will capitalise on the rises. Last night, Labour claimed that one-in-four mortgage-owning households will experience a jump in repayments. According to Labour’s analysis of official data, homeowners coming off two-year fixed-term mortgages are forecast to pay £500 a month more on average.

Writing for The Telegraph, Lisa Nandy, the…