A chorus of voices, including the IMF, have censured the new prime minister’s plan, which is also wreaking havoc on Britain’s mortgage market
The yield on the benchmark 10-year bond jumped as high as 4.6 per cent on Wednesday, the highest level since the financial crisis of 2008. Yields move inversely to prices, which means that investors have been bidding down the price of bonds and demanding a higher interest rate in return.on long-term bonds, stretching out 20 to 30 years, forced some pension funds to sell assets in order to meet cash collateral requirements.
The big political risk for Ms. Truss is the impact all of this is having on people trying to pay off their mortgages and other loans. Ms. Truss took over from Boris Johnson as Conservative Party Leader, and Prime Minister, less than a month ago and she has been eager to set out what she hoped would be a bold agenda based on free-market principles.
Interest rates are now expected to climb to 6 per cent by next summer, up from the current Bank of England rate of 2.25 per cent and 0.1 per cent last December. “If mortgage rates rise to 6 per cent – as implied by markets’ current expectations for bank rate – the average household refinancing a two-year fixed rate mortgage in the first half of 2023 will see monthly repayments jump to £1,490 , from £863,” said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics. “Many simply won’t be able to afford this.”
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