HOMEOWNERS should prepare for interest rates of five per cent, a 1000 per cent leap from the current 0.5 per cent Bank of England interest rate.
This was the advice on Sunday from Bank of England Markets Chief Paul Fisher, who also doubles as a member of the bank’s Monetary Policy Committee.
This lurch to the ruination of homeowners comes after a protracted attempt to try to do the impossible, use rock bottom interest rates to organise the very weak manufacturing sector for an export-led recovery to rescue the UK from the results of the banking crisis.
This is the same manufacturing sector that was belittled over the last two decades and deliberately shrunk. We were told by the banks and their politicians that they would ensure that Britain prospered, and that industry was old capitalism. Under the new ‘global capitalism’, the banks would have loads of money and some would even trickle down to the service industries. Then came the great banking crash!
That the almost destroyed manufacturing sector could not rescue British capitalism was a surprise only to the Bank of England. Rock bottom interest rates in fact ushered in a complete stagnation of the capitalist economy and also galloping inflation, which is now beyond all control.
Having failed with a no interest rate, let inflation rip policy, the Bank is now lurching in the opposite direction.
Fisher has urged homeowners to start preparing for a return to ‘normalised’ interest rate levels of around five per cent.
The normalcy consists of the fact that millions will lose their homes, and will either become vagrants or live in tent cities all over the UK.
The degree of ruling class contempt for the working class and the middle class involved in this cynicism can be gauged by the findings of a Bank of England research paper which calculated that seven million homeowners are at risk if interest rates should rise.
Two thirds of mortgage borrowers are currently on variable rates, it found, compared with roughly half in a typical year. On current wages, if rates were at five per cent, households would be spending more of their disposable income on debt interest than at any time in the past 20 years.
Household debt in the UK is £1.45 trillion, of which £1.2 trillion is mortgage borrowing. An increase in rates would ruin millions.
Fisher tried to rationalise this crisis by turning ‘savers’ against mortgage holders, saying: ‘We have to bear in mind savers have been doing particularly badly while borrowers have been benefiting. We can’t favour one group over another.’
However, this is precisely what they have been doing, hoping that rock bottom interest rates would create a miracle situation, despite ruining savers. When it didn’t work, they reversed policy, and decided that in order to save capitalism, homeowners should be dispossessed by raising rates.
The current hole that the bank has dug for the bosses was expressed by the Monetary Policy Committee thus: ‘It’s not impossible that we would see a quarter of negative growth. . . The output growth of UK tends not to be that volatile quarter to quarter, but in this sort of situation when you are recovering from a deep recession it is not impossible.’
Bankers are like the Bourbons, they have learned nothing and forgotten nothing. They continue to treat the people, their savings and their jobs and their homes as of no consequence, and all to be sacrificed to save capital.
Faced with Fisher’s normalcy bombshell, there can only be one answer.
There must be a socialist revolution to stop this catastrophe taking place, by putting an end to capitalism by expropriating the bankers and capitalists and bringing in socialism.