Inflation refuses to budge as under-40s, renters and London feel the pain

INFLATION BLOW AS LONDON FEELS... THE BIG SQUEEZE

- Nicholas Cecil and Simon English

LONDONERS and the under-forties will be hardest hit by the mortgage rise juggernaut battering Britain which is also sending rents spiralling, leading economists warned today.

The Institute for Fiscal Studies laid out the scale of the exploding home loans crisis as fears sky-rocketed that the Bank of England will be forced to hike interest rates far higher than expected in a desperate bid to tame runaway inflation.

A torrent of dismal data today showed:

⬤ Entrenched inflation remained at 8.7 per cent in May, the same as April, pushed up by the cost of air fares, second-hand cars and computer games, and worse than predicted in the City.

⬤ More worryingly, core inflation — which excludes food and energy prices — rose to 7.1 per cent, the highest since March 1992.

⬤ Britain’s debt mountain hit £2.6 trillion in May — or more than we all produce in a year.

⬤ Food inflation was still hammering family budgets despite being down slightly, from 19.1 per cent in April to 18.4 per cent, after hitting a 45-year high in March.

The “stickiness” of inflation prompted City traders to bet that the Bank will hike its interest rates to six per cent, a level unseen this century, in an attempt to slow demand.

The Bank’s Monetary Policy Committee is meeting tomorrow and there were some predictions it could go straight for a “jumbo hike” from 4.5 per cent to five per cent.

Amid the gloom, the new IFS report warned that some 1.4 million mortgage holders — including about 300,000 in London — will see their mortgage payments rise by at least 20 per cent of their disposable income as they move from low to far higher rate deals. It stressed that about 690,000 of the 1.4 million are aged under 40.