In a surprising development, new official figures reveal that wages in the UK experienced a record annual surge during the April to June period. Regular pay witnessed a remarkable 7.8% annual growth rate, marking the highest level since comparable records commenced in 2001. This robust increase has triggered speculation that the Bank of England may resort to raising interest rates to curb ongoing inflation concerns.
Despite a slight easing, inflation, which measures the rate of price increase, remains notably high at 7.9%. The substantial wage growth has ignited forecasts that the central bank might be compelled to enact another interest rate hike in an effort to alleviate inflationary pressures.
Darren Morgan, the Director of Economic Statistics at the Office for National Statistics (ONS), which published the wage and employment data, highlighted that the latest figures imply a recovery in real pay growth when considering the rate of inflation. Prime Minister Rishi Sunak remarked that there is a “light at the end of the tunnel” for those grappling with the cost of living.
However, while wage growth has demonstrated significant momentum, it has not yet outpaced the speed of price escalation. Mr. Morgan indicated that real pay growth remains slightly negative, with a decline of 0.6%. The juxtaposition of rising wages and persistent inflation has raised concerns about the actual purchasing power of consumers.
Labour’s Shadow Work and Pensions Secretary, Jonathan Ashworth, criticised the Conservative government’s handling of the situation, asserting that these figures underscore their failure to adequately support working individuals and businesses.
In related news, data from the Financial Conduct Authority (FCA) has revealed that some borrowers with interest-only mortgage deals are underestimating the challenges of repaying the final capital amount at the end of the mortgage term. These borrowers, who opt for interest-only deals to achieve lower monthly payments, may face a shortfall in funds when the time comes to settle the outstanding balance.
David Geale, Director of Retail Banking at the FCA, acknowledged that devising a feasible plan to repay the capital presents a significant challenge for interest-only mortgage borrowers. Despite the survey indicating that over 80% of such borrowers are confident about covering the final mortgage cost, the FCA estimates that the actual number likely to face a shortfall is closer to 46%, compared to the 36% who voiced concerns in the survey.
