(Bloomberg) — Rising mortgage payments are squeezing the finances of millions of borrowers in Britain, threatening to undermine household spending and the broader economy.
The dream of a soft landing that would have the Bank of England squeeze out inflation without condemning the country to a recession looks increasingly remote. Inflation is cooling only slowly, forcing the central bank to go hard on Thursday with a bigger-than-expected hike that took the key rate to 5%.
Markets believe the only way to curb prices will be to go even further and push rates to levels not seen in more than two decades.
After falling energy prices offered a brief moment of optimism, the UK has been pulled back into the political and economic throes of a cost-of-living crisis. The squeeze is eating into incomes, taking away money that might otherwise be spent in stores, bars and restaurants, creating a drag on an economy forecast to grow just 0.2% this year. Only Germany is expected to have a weaker performance among major developed economies.
