Homeowners could face further mortgage pain if Labour wins the general election, HSBC has warned.
The banking giant warned Sir Keir Starmer’s plans for a “genuine living wage” could drive up labour costs.
And economists at HSBC warned businesses could pass this on to consumers, forcing the Bank of England to keep interest rates high to combat inflation. This would then prevent banks from being able to offer homeowners lower interest rates.
Analysts also warned the policy could force businesses to make more staff redundant because of higher costs.
Labour is proposing a minimum wage which takes into account the cost of living, which it would extend to all adults, not just over 21s, as the current one does.
HSBC warned that an adjustment from the present national living wage of £11.44 to the voluntary “real living wage” of £12 an hour would mean “another big rise” in costs for employers in April 2025.
HSBC senior economist Elizabeth Martins said: “A higher minimum wage could increase costs and reduce efficiency, adding to unit labour costs.
“This in turn could either push firms into reducing headcount (i.e. higher unemployment) and/or sustain lingering inflation pressures, keeping Bank Rate higher for longer.
“While this has been a risk that hasn’t really crystallised since the UK’s minimum wage was introduced, at some level it would presumably have a detrimental impact on unemployment – we just don’t know where it is until we reach it.”
Labour has pledged to remove the “discriminatory” age bands affecting National Minimum Wage.
This would mean that all adults are entitled to the same pay and a pay rise for workers across the UK.
The party’s manifesto reads: “Labour will also remove the discriminatory age bands, so all adults are entitled to the same minimum wage, delivering a pay rise to hundreds of thousands of workers across the UK.”