George Osborne has issued a stark warning that mortgage rates will rise if Britain leaves the European Union.

The chancellor said he thought it was likely interest rates, and therefore the cost of home loans, would rise if Britons vote to leave the EU in the referendum on 23 June. But Brexit campaigners accused Osborne of panicking and resorting to intimidating voters.

Asked if he thought the cost of mortgages would increase on a British exit from the 28-nation bloc, Osborne said: “The short answer is yes. I think that is likely, but I’m not in charge of interest rates.”

He said minutes of the Bank of England’s monetary policy committee, which sets interest rates, contain “repeated reference to the fact that there is an inflation mandate and they will stick to delivering their inflation mandate”.

The chancellor’s argument is that if there is a vote to quit the EU, sterling would slump and that would push up the cost of imports. That would mean rising prices and the MPC would have to act to prevent inflation taking hold.

He said this could lead to the MPC raising interest rates from their all-time low of 0.5% - where they have sat since 2009. “You would have rising prices and a Bank of England with an inflation target committed to respond to that,” Osborne said at the International Monetary Fund (IMF) spring meetings in Washington on Friday.

Osborne’s warning comes on the first day of the official 10-week EU referendum campaign. Vote Leave, which has been designated as the official lead campaign urging Britain to leave the EU, accused Osborne of fear-mongering and avoiding talking about EU migration and the money the UK sends to Brussels.

Its chief executive, Matthew Elliott, said: “Less than 24 hours in and the pro-EU camp are already panicking - resorting to doing down the economy and people’s mortgages to intimidate the British public into voting their way.”

The chancellor’s view on the likely direction of interest rates after an out vote is not widely supported. Most City economists believe an interest hike in the wake of a Brexit vote is very unlikely, given the Bank would want to shore up confidence. A Reuters poll this week found that 17 of 26 economists working in the City thought a vote for Brexit could prompt the Bank to cut interest rates for the first time since the financial crisis.



Osborne said that “every single independent opinion is we would be worse off” as a nation if the UK left the EU, and suggestions from Vote Leave that Britain can keep the economic benefits of being in the EU whilst leaving are “project fantasy”.

“You can make your arguments about whether Britain should leave, but don’t pretend that we would be economically better off. We would pay a heavy economic price for leaving,” he said.



At its meeting to set interest rates this week, the Bank weighed up how it might respond to a vote to leave the EU. But in minutes from the meeting released on Thursday, policymakers stopped well short of indicating that they would either cut or hike interest rates.

The minutes said: “Such a vote might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short term … A vote to leave could have significant implications for asset prices, in particular the exchange rate.



“The MPC would have to make careful judgements about the net effects of these potential influences on demand, supply and inflation. Ultimately, monetary policy would be set in order to meet the inflation target, while also ensuring that inflation expectations remained anchored.”

Economists said the tone of the minutes suggested the Bank would tread very carefully both before and after the vote.



Ryan Djajasaputra, an economist at the bank Investec did not believe the minutes pointed to an interest rate rise in the aftermath of a Brexit vote. “If there were to be an exit from the EU there wouldn’t be an interest rate hike,” he said.

Over the longer term a vote to leave could push up mortgage rates, however, Djajasaputra added. “You could see some tightening in credit conditions which would potentially push up on household borrowing costs.”

Kallum Pickering, senior UK economist at the bank Berenberg said a cut was more likely than a rate rise in the event of a Brexit. The chancellor’s mortgage rate warning was a political move, he added. “The best thing for the in camp is to be pragmatic and to rely on the fact that British people vote with their wallets,” said Pickering.

As well the potential increase in mortgages, Osborne warned that there was a “near universal view” that “Britain as a home for financial services would be damaged”.



“Whilst some financial activity would continue in the City, quite a lot of it would leave and relocate in EU. And let’s remember that there are many millions who work in that industry it’s not all the square mile. People should make this very important decision on 23 June with their eyes open.”

His warnings on mortgages came as the chancellor revealed that the US, China and Japan have all warned him that they are anxious that Britain’s potential exit from the European Union would cause an immediate short-term shock to the global economy.

The chancellor said finance ministers from across the world have sought him out at the IMF spring meetings in Washington to raise concerns about the economic and geopolitical impacts of Britain leaving the EU. Osborne said the anxious mood among G20 nations has “been enhanced by the perceived risk of Britain leaving the EU, and that has been raised by the Japanese, the Chinese, the IMF, a number of Europeans, the OECD and others in the various conversations”.

His comments were echoed by a joint communiqué from G20 finance ministers and central bank governors at the end of their talks in Washington. The statement said the global recovery continued but there were many threats to the outlook. “Geopolitical conflicts, terrorism, refugee flows, and the shock of a potential UK exit from the European Union also complicate the global economic environment,” the statement said.



