The ONS has released its latest figures on the impact of the crisis this morning, with around 35 per cent of adults reporting it was difficult to afford their rent or mortgage payments. A report published yesterday by accountants Grant Thornton predicts that living standards will continue to decline for another ten months, with households absorbing a total £65bn hit to their spending power before things bottom out in May 2024. Were the next election to be held in the spring, as is traditional, it would take place at the British consumer’s lowest ebb.
This is the main reason we expect Sunak to hold out until late 2024 (the latest possible date is 28 January 2025) to fight the next election, but it would take a miracle for the British consumer to be at a much higher ebb by then. Panmure Gordon’s analysis suggests that the housing market has only absorbed a third of the impact of rising interest rates so far, and this week’s financial stability report from the Bank of England acknowledges that “market expectations are for Bank Rate to average around 5.5 per cent over the next three years”. Shocks to mortgage holders will continue well into the next parliament, with hundreds of thousands of households facing a jump of at least £500 a month by the end of 2026.
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