Borrowing costs for home-owners and buyers would go up if the UK left the European Union, George Osborne has warned.
The Chancellor last night said households would ‘pay the price’ of a Brexit in the form of higher mortgage rates as lenders react to financial instability.
British borrowers have enjoyed record low interest rates on mortgages and personal loans in recent years as the prospect of a Bank of England base rate hike has persistently remained beyond the horizon.
But according to the Chancellor, experts are ‘pretty clear’ that lenders would start to raise rates if UK voters choose to leave the 28-strong bloc in the June 23 referendum.
‘The Bank of England is independent and it makes its decisions on interest rates,’ Osborne told BBC television in Washington where he is attending a half-yearly meeting of global finance officials at the International Monetary Fund.
‘But the overwhelming view of the experts here in Washington is that if Britain leaves the EU, prices would go up and there would be instability in financial markets,’ he said.
‘That means it’s likely that mortgage rates would go up, families would pay the price of Britain leaving the EU.’
Some analysts say that a sharp fall in the value of sterling, which could follow a Brexit vote, might prompt the Bank’s monetary policy committee to raise interest rates to fight the inflationary impact of a weaker currency.
But most economists taking part in a poll conducted by Reuters news agency this week said the MPC would probably cut rates in the event of a Brexit in order to offset the shock to the economy.
Property experts this week warned that a ‘climate of uncertainty’ is brewing across Britain’s housing market, as the looming prospect of a potential Brexit, buy-to-let investor jitters and a weaker pound take their toll.
The Royal Institution of Chartered Surveyors said that for the first time since 2008 expectations for house sales have dipped into negative territory. Nearly 40 per cent of surveyors told RICS they expect London property prices to fall over the next three months.
And the International Monetary Fund earlier also warned that the UK quitting the EU could inflict ‘severe regional and global damage’ and downgraded its forecast for economic growth.
Mr Osborne, who is visiting the US, told Sky News: ‘If you look at the view of the experts here at the IMF in Washington it’s pretty clear that if Britain votes to leave the EU then prices will go up and there will be instability in financial markets.
‘What that means for families is that mortgage rates are likely to go up. In other words, it will be families paying the price if Britain votes to leave the EU and I think it’s another reason why, frankly, we are stronger, safer and better off inside the European Union.’
Osborne and Prime Minister David Cameron are trying to persuade voters to choose to stay in the EU. But campaigners who want Britain out of the bloc accuse the ‘In’ campaign of resorting to scare tactics and say the country’s economy would flourish if it left the EU.
Opinion polls have shown voters are split almost 50-50.