Resolution Foundation: Bank forecast means £390 real pay cut by 2027
The Bank of England’s new outlook, not Thursday’s quarter-point rise to 4%, is where “the real danger lies”, the Resolution Foundation says. Inflation is forecast to peak at 4.9% next spring and not return to target until the third quarter of 2028; private-sector real earnings fall 0.5% next year, leaving the average worker £390 worse off in 2027 than in 2025. Some 1.4 million households roll off fixed mortgages over the next year.
The Bank’s MPC voted 8–1 on 4 November, with Catherine Mann preferring a half-point rise; its summary says CPI, 3.5% in September, “is now expected to rise to around 5% by the middle of next year” and that policy “is not on a pre-set path”. Andrew Bailey said that without “real progress towards settling the conflict in the Middle East” he could “see the argument for a further increase in rates”. Fixed mortgage rates rose about a percentage point before the Bank moved, costing a typical first-time buyer £140 a month; the national mortgage interest bill is projected at £72bn in 2027. Growth is expected to average 1.1% over two years.