Rishi Sunak urges people to hold their nerve on interest rates

The UK Prime Minister has urged homeowners and borrowers to “hold their nerve” over rising interest rates aimed at bringing down stubborn inflation.

Rishi Sunak told Sunday with Laura Kuenssberg: “I want people to be reassured that we’ve got to hold our nerve, stick to the plan and we will get through this.”

This week the Bank of England raised interest rates to a 15-year high of 5%.

Millions of people are facing higher mortgage repayments following the rise.

Meanwhile, those who rent could face higher payments or the prospect of squeezed landlords selling their property, according to the National Residential Landlords Association.

Mr Sunak continued to back the Bank of England despite some Conservatives saying it has not done enough to bring inflation back to its 2% target.

Inflation – which measures the rate at which prices are rising – remained at 8.7% in May despite the Bank raising interest rates 13 times since December 2021.

“I can tell you as prime minister, the Bank of England is doing the right thing,” Mr Sunak told the BBC. “The Bank of England has my total support. Inflation is the enemy.”

Lib Dem leader Ed Davey criticised Mr Sunak’s comments as “patronising”.

He said: “People need help, not a prime minister instructing them to hold their nerve.

“Struggling homeowners will be rightly furious after watching an out of touch prime minister who has no idea of the pain caused by rising mortgage rates.”

Mr Sunak has pledged to halve inflation by the end of the year.

But former Treasury Minister Andrea Leadsom accused the Bank of doing “too little, too late”.

While Karen Ward, a member of chancellor Jeremy Hunt’s economic advisory council, said the Bank had “been too hesitant” in its interest rate rises so far and called on it to “create a recession” to bring inflation under control.

Mr Sunak said: “I’ve never said that it’s not challenging. I’ve never said that this isn’t going to be a difficult time to get through. But what I want to give people the reassurance and confidence is, that we’ve got a plan, the plan will work and we will get through this.”

In recent weeks, banks and building societies have been withdrawing mortgage deals in anticipation of higher interest rates.

The average two-year fixed residential mortgage is now 6.19% while the five-year rate is 5.82%. In June last year, those rates were closer to 3%.

The voluntary changes allow homeowners to just pay the interest on their mortgages and Mr Hunt said this would not affect borrowers’ credit scores.

Labour has called for the agreements to be mandatory and rolled out across the banking sector. Otherwise, according to Labour’s housing secretary Lisa Nandy, an estimated two million people “will not experience the benefits”.

The government must “not just talk a good game,” Ms Nandy told Sunday with Laura Kuenssberg,”but make sure that it happens”.

Elsewhere Labour has called on banks to pass on interest rate rises to savers in order to reduce inflation.

The Lib Dems have called for a targeted Mortgage Protection Fund, paying grants of up to £300 a month to homeowners on the lowest incomes and those suffering from the sharpest rises in rates.