MORTGAGE rates could rise if Britain left the EU, the Remain camp has warned after the Bank of England said the in-out referendum had heightened financial uncertainty and could create a credit crunch.
The Bank’s financial policy committee(FPC) said the value of the pound, which plummeted earlier this year amid Brexit fears, could weaken even further and have an impact on the cost and availability of finance for UK borrowers.
In the minutes from its latest policy meeting, the FPC said: "The committee assesses the risks around the referendum to be the most significant near-term domestic risks to financial stability."
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It stressed how its outlook for the UK's financial stability had "deteriorated" since its previous meeting in November as dark clouds continue to circle over the global economy and the threat of Brexit disrupts the financial markets.
Lord Darling of Roulanish, the former Labour Chancellor, speaking for Stronger In Europe, described the FPC’s assessment as a stark warning, which would be a major worry for everyone whose job and income depended on the long-term health of Britain’s economy.
“This assessment makes it clear our economy would be more vulnerable and less resilient if we vote to leave the EU; leading to higher mortgage rates for families and higher interest rates for Britain’s businesses.
“This is not a report Leave campaigners can simply dismiss as ‘biased’ or ‘scaremongering’. It is a serious piece of work that should make everyone think twice about irresponsibly gambling with people’s jobs and livelihoods.”
The ex-Edinburgh MP, who led the Better Together campaign against Scottish independence, added: “It is clear from this report that Britain is stronger, safer and better off remaining a member of the EU.”
But John Redwood, the former Conservative cabinet minister who is in favour of Brexit, said the FPC “have had to be very careful to remain neutral and they do seem to wade in on one side of this argument. For example, why do they ascribe the recent weakness in sterling to fears of Brexit but they don’t ascribe the reductions in interest rates the Government has to pay also to the possibility of Brexit? If it affects one, it surely affects the other”.
The Conservative MP said Britain would get £12 billion a year back from the EU if it left, which would help the balance of payments deficit. “So one of the beneficial consequences of Brexit once you stop the contributions(is) your balance of payments improves; it doesn’t weaken.”
Asked if Brexit would cause market instability, Mr Redwood said there was “endless volatility” already and there would be whether or not Britain left or stayed.
Meantime, Nicky Morgan, the Education Secretary, warned that Brexit would hit young people the hardest.
Speaking at the Fashion Retail Academy in London, she said: "We know it's young people who will face the brunt of the damage a vote to leave will bring because the great recession demonstrated the stark reality that when we experience economic shocks, the likes of which we could suffer if we leave the EU, it's young people who suffer.”
Noting how following the 2008 crash the largest increases in the rate of unemployment were amongst young people, she added: "But that shouldn't be a surprise because when the economy struggles and firms stop hiring, it's those in the entry level who they stop recruiting first."
Elsewhere, an Ipsos Mori poll found that 48 per cent of people thought David Cameron should resign as Prime Minister if the UK voted to leave the EU while 44 per cent said he should continue.
On the question of in or out, 49 per cent said they would vote to stay while 41 per cent said they would opt to leave; the respective figures in February were 54 and 36. The gap has more than halved in a month.