Increasing the interest rate to 5%, is this really the fairest way to slow inflation?

Worse is to come next year when the government scraps section 21. Landlords have been selling their properties at an alarming rate.

This isn’t going to work anyway.

The bank is trying to slow demand in order to stop inflation, but it isn’t demand that is pushing up inflation - it is a supply crises, energy and goods.

The government has a number of tools in its box it could use, but it seems struck by severe inertia, and is sitting on the sidelines moaning about the BoE.

And to answer your question - no it isn’t fair or right

Thee has been a lot of advice on tv about what to do if you can't pay meet your mortgage repayments. One is to extend the term of the mortgage. Another is to ask for a repayment holiday and a third is to switch to an interest only mortgage.

Depending upon where your friend lives she could rent a room. Tax relief is available for rents less than £7500 (time apportioned if the let period is less than one year. This relief is only available to someone renting a room in their own house.

What is the alternative?

This strikes me as being unfair and ineffective. For a start the government’s claim is that 5 percent will slow down inflation and I don’t follow the logic, such as it is. So this policy is damaging young people on the whole. It seems that the government wants to make it difficult for people to spend surplus money by taking away surplus money! So much for a growth strategy. However there are more people without a mortgage than with. Why target this group? I didn’t think that Rishi Sunak could be this bad to be fair.

M0nica

What is the alternative?

What is the alternative to what, MOnica?

You're an economist. You surely must know that there is more than one cause of inflation and that supply side inflation can't be controlled by putting up interest rates?

Better to cut them rather than continue to make people poorer for no gain.

What are various current mortgage interest rates? Projections?

Projected savings interest rates?

However there are more people without a mortgage than with

Don't forget, ronib that there are also many people renting and many rents have risen with interest rates, too.

Also, businesses with loans, on which they have to pay more interest, are likely to raise their prices, too, in order to cover their costs.

MaizieD so hardly likely to be deflationary as a political gesture?

The only way I can see it being deflationary is if businesses go bankrupt and people lose their jobs (and homes), forcing them to live hand to mouth.

I don’t want to hog the debate but how is forcing people into poverty ‘deflationary’?

But what do we know is causing inflation?

First the cost of energy

Second the cost of raw materials, imported goods and food.

What is not causing inflation is the rise in salaries and spare money in the system. People, particularly those with families are struggling to pay their bills so what is the logic of taking even more money out of the system?

What needs to be addressed is the supply crises. The government could and should have capped the price of fuel at a much lower rise taking the inflation headline down immediately, and indeed energy costs are beginning to fall, but the biggest issue is the supply crises in imports, raw materials etc. and this is still a real underlying issue and showing no sign of falling.

ronib

I don’t want to hog the debate but how is forcing people into poverty ‘deflationary’?

Because they'll hardly have any money to spend, so retailers will be forced to bring down prices if they want to sell anything (that appears to be the government's theory anyway).

Growstuff this is no way to govern.

Suppressing peoples spending ability will simply push the economy into a recession.

Very rich people are saying that we "need" a recession.

It just struck me that RS is ex Goldman Sacks and I wonder if he’s trying to expand profits in the banking sector?

Ilovecheese

Very rich people are saying that we "need" a recession.

We don’t and it won’t work. Remember Thatcher she forced the country into recession to “tackle” inflation - although the reasons for inflation were very different then- and as a result working people suffered badly, with 3million unemployed, thousands losing their homes etc

But it didn’t work.

The only thing that worked was the Big Bang in the city and growth.

The government needs to address the supply crises and the answer is staring them in the face.

ronib

Growstuff this is no way to govern.

I'm not claiming it is. IMO it's nuts.

Whitewavemark2

Suppressing peoples spending ability will simply push the economy into a recession.

I think that could be the idea. Then people will be afraid of losing their jobs, so won't demand a pay rise or they will actually lose their jobs and end up taking any job going, whatever the pay.

Whitewavemark2

The government needs to address the supply crises and the answer is staring them in the face.

But that might involve pesky foreigners!

Ilovecheese

Very rich people are saying that we "need" a recession.

Then they can buy up all the property going cheap and rent it back to the people who used to own it!

MaizieD what is the alternative to Increasing the interest rate to 5%,........ to slow inflation?