Around three million UK households will see their mortgage repayments rise over the next two years as high interest rates continue to take effect, the Bank of England has said.

As many as 400,000 homes are likely to experience “very large increases” of more than 50%, its financial policy committee said.

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Interest rates have been brought to a near two-decade high of 5.25% in an effort to clamp down on price rises behind the cost of living crisis.

Inflation – the pace of price rises – had been at a 40-year high but now stands at the Bank’s 2% target as the high interest rates made borrowing more expensive and limited spending.

Despite the higher base interest rate set by the Bank, more than a third of mortgage holders (35%) are still paying a mortgage rate of less than 3%, the financial policy committee said on Thursday in its financial stability report.

This is because they signed up for a deal before the energy price shocks which resulted from the war in Ukraine.

Once those deals come to an end, households will have to sign up to a more expensive product.

Most mortgage holders, however, have repriced since mortgage rates started the cycle of increases late in 2021.

A typical household rolling off a fixed-rate mortgage before the end of 2026 is due to face a jump of around £180 a month, the report said.

It is the job of the financial policy committee to ensure the UK financial system can handle economic shocks and risks.

The body said UK lenders are still in a strong position to support homes and businesses, even if the economy worsens.

At present, interest rates are expected to come down in the coming months with a cut forecast for August, September, November and December.

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But consumers have been warned not to expect a return to the era of ultra-low interest rates.

The chief executive of the UK’s largest lender Charlie Nunn told Sky News the new normal is mortgage rates of 3.5% to 4.5%.

Multinational conglomerate Tata is set to shut the Port Talbot steelworks earlier than first announced over strike plans.

The company has said it will bring the final closure date to 7 July, from September, as Unite members at the steel plant were due to strike on 8 July.

Cutting emissions

One of the steel blast furnaces is to close at the end of this month in a push to reduce carbon emissions at what is the UK’s single largest source of CO2.

But that second closure looks set to take place next month, quickening the end of the plant and the loss of 2,800 jobs – 2,500 in the next year, a further 300 in three years.

It comes despite £500m of taxpayer cash to support the site’s transition to cheaper, greener steel production to cut emissions.

The previous fossil-fuel-powered blast furnaces are to be replaced by a single electric arc furnace.

Political intervention

Labour had pleaded with the company to hold fire on any closures before a new government is elected on 4 July.

Senior Labour figures including shadow Welsh secretary Jo Stevens had urged Tata to wait for a possible Labour government so fresh talks could take place.

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Unite general secretary Sharon Graham said: “Unite is fighting for the future of the steel industry. We have secured serious investment from Labour to safeguard jobs.”

Ms Graham described Tata’s move as being the “latest In a long line of threats that won’t deter us”.

“The Unite campaign is not about selling jobs, it’s about securing the long-term future of steel making in this country for thousands of workers in Port Talbot and South Wales. We call on the real decision-makers in Mumbai to take hold of this dispute, sit down, negotiate and realise that the investment secured will be good for the company and workers.”

The GMB union also voiced its support, saying “Tata must step back from this irreversible decision and safeguard steelmaking assets. There’s a general election in days that could change so much”.

A Tata Steel spokesperson said Unite’s strike announcement was made unilaterally and it is “unfortunately forced to commence legal action to challenge the validity of Unite’s ballot”.

“In the coming days, if we cannot be certain that we are able to continue to safely operate our assets in a stable fashion through the period of strike action, we will not have any choice but to pause or stop heavy end operations (including both blast furnaces) on the Port Talbot site.

“That is not a decision we would take lightly, and we recognise that it would prove extremely costly and disruptive throughout the supply chain, but the safety of people on or around our sites will always take priority over everything else.

“The company again calls for Unite to withdraw its industrial action and join Community and GMB unions in giving consideration to the company’s proposed memorandum of understanding, which puts forward a wide-ranging proposal including generous employee support packages, training and skills development.”

One of the policy areas on which the Labour Party has been very specific during this general election campaign is its approach towards North Sea oil and gas production.

The party has been clear that it will raise existing windfall taxes first slapped on North Sea oil and gas producers in 2022 by Rishi Sunak, when he was chancellor, taking the total level of tax from the current 75% to 78%.

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Ed Miliband, the shadow secretary of state for energy security and net zero, also proposes to take away tax reliefs Mr Sunak put in place alongside the windfall tax, to sugar the pill, which allowed producers to offset their investments in new production against their tax bills.

Mr Miliband, who has referred to these tax breaks as ‘loopholes’, argues this would bring the tax treatment of the British North Sea into line with that of the Norwegian North Sea. He is also proposing a ban on new oil and gas exploration licenses as part of what remains of his ‘green prosperity plan‘.

With Labour so far ahead in the polls, that is already having an effect on investment in the North Sea, with a trio of companies – Jersey Oil and Gas, Serica Energy and Neo Energy – announcing earlier this month that they are delaying, by a year, the planned start of production at the Buchan oilfield 120 miles to the north-east of Aberdeen.

Industry attacks

Serica, which on average has produced 43,781 barrels of oil or oil equivalent per day so far this year, sought today to remind politicians of the potential consequences of their actions.

David Latin, Serica’s chairman and interim chief executive, unleashed a furious attack on the proposals – telling shareholders: “I have been involved in this industry for more than 30 years and have worked all over the world.

“Other than when I was responsible for a company which had significant assets in a war zone, I have never encountered a situation which was so challenging when it comes to making investment decisions, and planning for the future more generally, as it is in the UK at present.”

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Reminding his audience that the UK consumes almost twice as much oil and gas as it produces, Mr Latin said that deficit would persist even as the country sought to reduce its consumption of hydrocarbons, with the gap being filled by imports.

He added: “These imports worsen our national balance of payments, only deliver jobs and taxes to foreign countries and, typically, have higher production and transportation carbon emissions by the time they get to our shores.”

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Addressing misconceptions

Criticising the Conservatives for persisting with windfall taxes despite oil and gas prices having returned to historically normal levels and Labour for proposing to raise those taxes, Mr Latin said there were a number of misconceptions around the tax regime – not least the notion that the windfall tax is being paid largely by oil majors like Shell and BP.

He went on: “As to the claim that the tax is being paid by the “oil and gas giants”, it is in fact independent companies like Serica who are most affected. The ‘majors’ account for only around a third of UK production and the vast majority of their profits are made overseas and are not touched by increasing tax rates on UK production.

“Indeed, for those companies such as Serica that continued to invest in their assets during periods of lower commodity prices prior to the invasion of Ukraine, the current fiscal regime represents a further punishment for risk capital committed to its portfolio during the very low commodity prices seen in the COVID period.

“Closing ‘loopholes’ in UK oil and gas tax seems to mean different things to different people.

“Whatever is meant, I wish to be crystal clear that reducing tax relief for capital expenditure below the rate at which tax is payable would make investment in the vast majority of UK North Sea projects unprofitable, meaning that these projects, and the jobs and tax revenues they would generate, simply will not happen.”

Union criticism of Labour

But criticism of Labour’s policy was also coming today from another direction.

Unite, the UK’s biggest union and traditionally Labour’s biggest financial supporter, also has concerns banning new oil and gas exploration licences that could force the UK to import more gas when it still has plenty of its own.

Today it published an open letter, urging a rethink on the ban, signed by nearly 200 local firms from Scottish towns dependent on the oil and gas industry – while some of those businesses joined Unite members in a demonstration outside Aberdeen’s Maritime Museum.

Sharon Graham, Unite’s general secretary, said: “Until Labour has a concrete plan for replacing North Sea jobs and ensuring energy security, the ban on new oil and gas exploration licenses should not go ahead.

“Labour must not allow oil and gas workers to become this generation’s coal miners. Scotland’s oil and gas communities are crying out for a secure future and that is what Labour must deliver.”

However, while businesses are warning that Labour’s policy will drive investment elsewhere and unions worry about the impact on jobs and local communities in north-east Scotland, there are others who think the party could go further.

Not going far enough

While Unite was staging its demonstration in Aberdeen, some 50 protestors from a group calling itself Stop Polluting Politics were staging one of their own 553 miles to the south at the Labour Party headquarters in Southwark, southeast London.

They allege that the party has “financial ties to polluting corporations” and have criticised a decision by Rachel Reeves, the shadow chancellor, to accept a £10,000 campaign donation from Lord Donoughue, the Labour peer, who has in the past chaired the Global Warming Policy Foundation – a climate change sceptic lobby group.

They allege that Ms Reeves’s decision to ‘water down’ Mr Miliband’s ‘green prosperity plan’ in February this year was influenced by the donation – something Lord Donoughue himself has vehemently denied.

It all highlights how energy policy threatens to become a major headache for Labour should it win the election a week today.