Wages in the U.K. are rising at a record high rate amid stubbornly high inflation, official figures showed Tuesday, bolstering expectations that interest rates will increase again — to the worry of homeowners who are seeing their mortgage payments spike to levels not seen since the global financial crisis 15 years ago.The Office for National Statistics said wages, excluding bonuses, rose by 7.3% in the three months to May, matching the highest rate since records began in 2001. The private sector was the main driver behind the increase.For months, workers have been seeking pay that keeps pace with high inflation, which is running at 8.7% despite declines in energy prices and a series of interest rate hikes from the Bank of England.The central bank has been raising rates since late 2021 to get a grip on rising prices, which were first stoked by supply chain problems caused by the coronavirus pandemic and then Russia’s invasion of Ukraine, which sent energy and food prices surging.WHAT HAPPENS IN BRITAIN IS BIDEN’S BIGGEST EMBARRASSMENTThe bank lifted its main interest rate by half a percentage point to a 15-year high of 5% last month and warned of further increases if inflation fails to show signs of falling back toward its target of 2%. By making borrowing more expensive, the bank is trying to keep a lid on spending, which should get inflation down.But with unemployment low, workers have been able to demand higher pay as inflation erodes their spending power, threatening to further fuel price spikes. That’s despite the jobless rate rising to 4%, when economists had anticipated an unchanged reading of 3.8%. People walk on a street in a shopping district in central London on Jan. 13, 2023. (AP Photo/Kin Cheung, File)”Soaring wage growth …. gets us into the kind of wage-price spiral dynamics that central banks absolutely hate and usually do anything to avoid,” said Neil Wilson, chief markets analyst at Markets.com.BIDEN MEETS KING CHARLES FOR FIRST TIME SINCE SKIPPING CORONATIONThe new wages data cemented expectations that the bank will lift its key interest rate to 5.25% next month, possibly to 5.5%. That was evident in the fact that the pound rose after the figures were released to a 15-month high against the dollar of $1.29.Expectations of higher borrowing rates are having a knock-on effect across lending markets, particularly in the housing market.For example, the average two-year fixed mortgage rate rose to 6.66% on Tuesday, according to financial information company Moneyfacts. That’s the highest level since August 2008, just before the collapse of U.S. investment bank Lehman Brothers.CLICK HERE TO GET THE FOX NEWS APPAround 2.4 million fixed-rate mortgages are due to expire by the end of 2024, according to figures from trade association U.K. Finance. Households will be looking to lock in new deals, which as things stand, will be substantially more expensive.”There is a significant increase in rates for customers maturing off their original product,” Henry Jordan, home commercial director at Nationwide Building Society, told lawmakers in Parliament.
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