EU exit 'could cause UK mortgage rises'

The cost of an average mortgage in the UK could rise by nearly £1,000 a year if Britain leaves the European Union, PM David Cameron has warned.

Short-term uncertainty caused by leaving the EU could tighten credit conditions and push up mortgage rates, according to Treasury analysis.

The Leave campaign said Mr Cameron’s “bogeyman” claims were “desperate”.

Meanwhile, Vote Leave’s Michael Gove and Boris Johnson warned of the “real” economic risks of remaining in the EU.

They said voters “cannot trust” the government’s promise that the UK will not contribute to a possible future bailout of a eurozone country.

A referendum on the UK’s membership of the EU will be held on 23 June.

Britain Stronger In Europe, supported by David Cameron and Chancellor George Osborne, said Treasury analysis suggested voting to leave the EU could add £920 to the annual cost of the average mortgage.

It said analysis – first revealed earlier in the campaign – had shown mortgage rates could rise by 70 basis points, meaning a mortgage with an interest rate of 1.5% would rise to 2.2%.



Trade and economy

The debate

  • About half of UK trade is conducted with the EU
  • The EU single market allows the free movement of goods, services, capital and workers
  • Trade negotiations with other parts of the world are conducted by the EU, not individual member states

Leave

  • UK companies would be freed from the burden of EU regulation
  • Trade with EU countries would continue because we import more from them than we export to them
  • Britain would be able to negotiate its own trade deals with other countries

Remain

  • Brexit would cause an economic shock and growth would be slower
  • As a share of exports Britain is more dependent on the rest of the EU than they are on us
  • The UK would still have to apply EU rules to retain access to the single market

EU referendum issues guide: Explore the arguments http://www.bbc.co.uk/news/uk-politics-eu-referendum-36027205 Explore all the issues Choose an issue: What both sides are saying All issues Main views

Such a rise for an average property costing £292,000 would result in a payment increase of £75 per month, pushing up annual payments by £920 a year.

First time buyers could expect to pay £810 more per year, Remain added, making it harder for people to get on the housing ladder.

Mr Cameron told the Mail on Sunday: “Nearly all experts agree there will be instant shocks to the economy if we leave the EU and there is clear and present danger of higher mortgage rates.”

In an interview with the Sunday Times, Mr Osborne said: “If we quit the EU the country would be poorer, there would be volatility in the financial markets and that would push up mortgage costs irrespective of what the Bank of England might do with official interest rates.”

There was “a clear consensus” amongst economists that leaving the EU would result in a rise in mortgage rates, the Remain campaign added.

‘Bogeyman claims’

However, Matthew Elliott, chief executive of Vote Leave said it was “desperate stuff for the PM to run down people’s mortgages in his bid to win the referendum”.

“Even the most pro-EU campaigners have admitted the economy will grow after we Vote Leave so bogeyman claims about mortgages are just the latest act of desperation from the remain campaign fast losing the plot and public,” he said.

It is not the first time the Remain campaign has warned about the cost of mortgages rising in the event of a Leave vote.

Last month, Mr Osborne said a vote to leave the EU would cause an “immediate economic shock” that could hold back growth in house prices.


Analysis

By Tom Bateman, BBC political correspondent

The early days of this campaign saw an air war waged between the two sides over the economy, in which the Remain team were more recently declaring victory.

They repeatedly pointed to the majority of economists backing their case and used the rapid-fire line that – on the economy – Leave have “lost the argument”.

The claims on mortgage rates rising after Brexit are not new.

Yet the £920 figure – extrapolated from a Treasury document released earlier in the campaign – is a fresh grenade lobbed towards their opponents.

But it appears to have done little to stop Vote Leave returning to fight hard over this crucial campaign ground.

The campaign’s claims on Eurozone bailouts and trade deals outside the EU may have been ridiculed by their rivals but they tell us one thing; the shelling over the economy is back on.


Letter to Cameron

Meanwhile, in a letter to Mr Cameron and Mr Osborne, leading Vote Leave campaigners said remaining in the EU would tie Britain’s economy to a eurozone “crisis” which was a “danger to Britain”.

Justice minister Mr Gove, former London Mayor Mr Johnson, and Gisela Stuart, MP for Birmingham Edgbaston, warned the UK would not be protected from future potential bailouts of eurozone countries.

“The eurozone institutions remain broken and have been unable to cope with the euro’s crisis,” they wrote.

“Despite writing a promise of ‘no bail-outs’ into the EU Treaties, there have been massive bailouts.”

They added: “The public cannot trust EU or Government promises that we won’t be paying for Eurozone bailouts given the history and how we can be outvoted.”

Remain campaigners dismissed the letter as “reckless nonsense”.

A Remain spokesman said: “As any credible expert will tell you, this letter from Leave is reckless nonsense – they are now guilty of actively misleading the British people.

“We have clear guarantees we will not contribute to bail outs and protections against eurozone integration.”

The government has previously said a legally binding agreement is in place to protect UK taxpayers’ money from future rescue packages.

‘Liberate ourselves’

On Saturday, Mr Johnson said around 300,000 jobs would be created if Britain leaves the EU.

At a rally in London’s Olympic Park, Mr Johnson said: “After we liberate ourselves from the shackles of Brussels we will be able to create hundreds of thousands of new jobs right across the UK.”

However, Labour’s Chuka Umunna, campaigning for the UK to remain in the EU, said the job claim was “embarrassing”, adding: “If you want see more jobs in the UK, you should vote to remain in Europe.”

Former Labour leader Neil Kinnock also called for young people to register to vote in the EU referendum, as a low turnout could lead to Brexit “by default”.

His message at a London rally came as he and five fellow former Labour leaders tried to persuade the party’s supporters to vote to remain in Europe.

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