According to an investment strategist, the economic characteristics of Britain make it one of the most vulnerable countries in the world.
Mike Harris, founder of cribstone strategic macro, believes that the main problem in the UK is that its mortgage market is seriously short-term.
In the United States and other European countries, people prefer long-term mortgages, while many Britons choose short-term loans of less than five years.
Tracking mortgages, which fluctuate with the Bank of England's benchmark interest rates, is also popular.
He said last Friday that this was a problem, because raising interest rates would immediately lead to the loss of household income, which may not really solve the problem of inflation.
He explained that the UK is a country that "imports inflation", so the impact of the Bank of England raising interest rates is not just the rebalancing of supply and demand, so as to slowly control the growth of consumer prices.
He said: "here, we are not actually trying to slow down economic growth, we are finally trying to rebalance expectations, and the UK is a country that 'imports inflation'... So we cannot effectively focus on supply and demand only.
”He added: "we are trapped in a situation where global inflation is driving our inflation at this stage. We have to combat consumers rather than reduce the propensity to consume in the future. We actually take more money from household income, which is impossible in the United States."
The Bank of England raised the interest rate by 0.25 percentage points last Thursday, raising the benchmark interest rate to 1%, which is the highest interest rate since 2009 and the fourth consecutive interest rate increase by the Bank of England.
The Bank of England also predicted that the inflation rate would reach 10% this year, and Russia's unprovoked attack on Ukraine intensified the soaring food and energy prices.
He said that he had twice asked the Bank of England to provide data on the country's two-year loan size and five-year loan size, but he was told that the bank did not retain this information.
He said: "the central bank does not realize the impact of each interest rate hike on the economy, which is absolutely crazy."
According to the data of British finance, an industry association, 1.5 million fixed rate mortgage transactions will expire in 2022, and another 1.5 million will expire next year.
Hargreaves Lansdown, an investment platform, calculated in the data released last Friday that after the latest interest rate hike, if a person re mortgages after the end of a two-year fixed-term transaction, their monthly payment may increase by 61 pounds.
According to Hargreaves Lansdown's calculation, if the benchmark interest rate reaches 1.5%, their monthly payment will increase by 134 pounds.
According to a survey of 2000 British adults conducted on behalf of the platform in April this year, more than a third of people are unable to afford these additional costs.
Harris said that due to the current interest rate hike, we are in an environment where we may destroy more demand than we should,
Because the Bank of England and former Governor Mark Carney did not do what they should do.
He added that the UK was now in the stage of facing reality. He said: "I think the UK is currently one of the most vulnerable countries in the world, because of the dynamics and the fact that the central bank governor has done nothing, they may still have a period of time.
”He believes that if policymakers now have a way to extend the debt maturity, they should actively do so.
A spokesman for the Bank of England declined to comment, but pointed to the recent statements made by central bank governor Andrew Bailey and chief economist Huw pill.
In the past, two-year fixed-term mortgages were very popular because the loan term was shorter and the loan cost was often lower. However, according to the financial times, the popularity of five-year contracts has been rising. In 2021, 50% of fixed-term contracts have such a term, while 45% of contracts are two-year contracts.
According to Bloomberg, data from the Bank of England last week showed that the effective interest rate (the actual payment rate) of new mortgages rose by 14 basis points to 1.73% in March, the largest increase since at least 2016.