Bank of England’s interest rate rise will hit workers the hardest

Striking Hull bus drivers protested on Thursday to say bosses are to blame for inflation (Picture: @UniteEconomy on Twitter)

The Bank of England continued its mission to make working class people pay for the economic crisis on Thursday. The central bank raised interest rates by 0.75 percent of a percentage point—from 2.25 percent to 3 percent.

The Bank forecast a “very challenging outlook” with a long recession ahead. The bank’s benchmark rate determines the amount ordinary people have to pay to borrow to buy a house or on a credit card or a loan.

The inevitable result of the rise are jobs lost, big increase in rents and mortgages, evictions and homelessness and longer queues at food banks. But there will be more cash going to people who have vast sums in savings.

It’s the eighth consecutive increase since December, pushing the rate to its highest level for 14 years, and the biggest single increase since 1989.

Over a long period, capitalism has increasingly become addicted to low interest rates and cheap credit to offset declining profitability and prevent an ever deeper crisis. Banks and companies have gorged themselves on the cheap money available as a result of quantitative easing and other scams for the corporations. 

That’s now coming to an end. The British rate rise on Thursday mirrors the same move by the US Federal Reserve the day before.

The Tories will let firms massacre jobs in an effort to hold on to profits. And the government hopes that the argument “you’re lucky to have a job” will hold down wage claims and weaken the strike wave. Andrew Bailey, the bank’s £575,000 a year governor, is cheering on the attacks.

Landlords, particularly the parasitic “buy to let” type, pass on interest rises to renters. They have borrowed cash to buy a house or houses to rent it out to make money. The renter has to pay the mortgage and provide income to the landlord. So the renter must now pay more so the landlord doesn’t take a hit.

A recent landlords’ survey showed nine in ten landlords have either already increased rents, or were poised to do so if rates went up this week.

In addition, when interest rates rise, about 1.6 million people on tracker and variable rate deals usually see an immediate increase in their monthly mortgage payments. Many of them are workers. Thursday’s increase meant those on a typical tracker mortgage will pay about £73.50 more a month. Those on standard variable rate mortgages face a £46 jump.

This comes on top of increases following the previous recent rate rises. Compared with pre-December 2021, average tracker mortgage customers would be paying about £284 more a month, and variable mortgage holders about £179 more.

There is also an impact on fixed deals, which about three-quarters of mortgage customers hold. Their monthly payments may not change immediately, but with lenders now anticipating higher rates, any new deals will be more expensive. That means new house buyers—or anyone seeking to remortgage—will also have to pay more.

The Bank of England is hammering workers. And then on 17 November chancellor Jeremy Hunt will impose a bitter new austerity round of cuts and tax rises that will guarantee more unemployment and poverty.

Hunt’s austerity assaults are an echo of similar devastating moves in 2010. But then the Bank kept borrowing costs at rock-bottom levels. Today the Bank and the Treasury are both turning the screw at the same time. The recession that follows will be deeper and longer.

They are the medieval doctors applying the blood-draining leeches to the anaemic patient. Instead of watching these ruling class manoeuvres as spectators, workers need to fight to defend and extend their interests.

On Thursday morning, striking bus workers in Hull staged a rally to ram home the point that bosses are responsible for the economic crisis. They unfurled a giant banner reading, “Cost of Greed,” blaming profiteering for rising inflation and interest rate surges. We need far more of such strikes and protests.