Labour’s plan to borrow £28billion will send mortgages soaring by £2,000 a year, claims the Treasury

LABOUR’S plan to borrow an extra £28billion will send mortgages soaring by almost £2,000 a year, the Treasury has claimed.

Every extra one per cent of GDP of borrowing — about £25billion — is likely to push up interest rates, it says.

Treasury modelling suggests that in the current economic conditions the increase under Labour’s plans might be between 0.5 and 1.25 per cent.

A 1.25 per cent rise would be £1,920 a year extra for a household with a £200,000 mortgage over 30 years.

With rates expected to come down in the spring, Treasury Chief Secretary Laura Trott warned: “The British economy is turning a corner with inflation at its lowest level in two years, so don’t let Labour ruin it.

“The cat is well out of the bag. Labour’s reckless £28billion-a-year borrowing binge will not only ratchet up debt and send mortgage rates sky high, but will lead to higher taxes for all.”

But Labour hit back: “The only party that has sent borrowing, mortgages and interest rates soaring over the last 13 years is Rishi Sunak’s Conservatives.

“It was on Rishi Sunak’s watch that national debt soared to the highest levels in 60 years.”

Data published yesterday showed Government borrowing was higher than expected last month.

However, it was lower than the same month last year as the Government spent significantly less on energy support for households.

But the Government has borrowed at least £24billion more so far this financial year compared with a year ago, according to the ONS.

Last night Chancellor Jeremy Hunt signed a post-Brexit finance deal with Switzerland.

The accord cuts red tape for financial services firms and banks to do business together.

He also hinted at further tax cuts in the spring as figures showed the Government was paid a record £77.6billion in tax last month.

Workers are being forced to pay more income tax because of the freezing of thresholds.

Mr Hunt said: “We would like to bring down the tax burden in a way that is responsible if we’re able to do so.

“But right now our priority is to bring down inflation.”

Earlier this week the Tories were buoyed by figures showing inflation dipped last month from 4.6 per cent to 3.9 per cent, the lowest for two years.