Andrew Dismore AM today criticised the Mayor’s Chief Economic Advisor, Gerard Lyons' calls for interest rates to rise to “5 or 6 per cent”.
Lyons today called for interest rates to rise to “5 or 6 per cent”, rather than the 2.5 per cent that the Governor of the Bank of England has suggested rates should return to in normal times. With the average house price in London now standing at £492,000, a rate increase of this scale could double the average monthly mortgage payment in London, from around £2,000 per month to £4,300 per month.
Under questioning today from Andrew Dismore AM on what interest rates should be set at when the economy returns to strength, Mr Lyons said “I’d sooner be five [or] six [per cent], than two [to] three [per cent]”.
Commenting on Mr Lyons’ comments, Labour London Assembly Member for Barnet and Camden, Andrew Dismore AM, said:
“The Mayor’s Chief Economic Advisor is a highly paid and respected individual in the City, so his views must be treated very seriously. If Mr Lyons had his way and interest rates reached 6 per cent, while this would obviously be good for savers, it would be disastrous for those who have bought homes on variable mortgages at current low rates.
“These comments show just how out of touch the Mayor and his team are. If rates reached six per cent there would be a serious risk of a collapse in property values in London. Thousands of homeowners are barely able to afford their mortgage repayments at the moment because of the excessive cost of a home in the capital. Even moderate rate rises could force these families to default, or to face the consequences of negative equity.”