This has been Rishi Sunak’s worst month as prime minister

Despite seeing off Boris Johnson, wave after crashing wave of economic turmoil – from mortgage hikes to runaway inflation – is overwhelming any buoyancy Sunak might be feeling. It’s sink or swim for a PM who is starting to look out of his depth, writes Andrew Grice

Rishi Sunak’s halo is losing its shine (Getty)

Today's worse than expected inflation figures are grim for the government. The consumer prices index is unchanged at 8.7 per cent and, most worryingly, core inflation (which omits items such as food and energy) has risen to 7.1 per cent, the highest for 31 years.

The figures will increase the pressure on the Bank of England to raise interest rates tomorrow and will therefore compound the mortgage crisis. With the cost of a two-year fixed-rate mortgage now above 6 per cent, Conservative MPs are increasingly jittery about the political impact of higher payments on homebuyers. The penny has dropped that the pain is going to last until the general election – whenever Rishi Sunak calls it.

Tory backbenchers are demanding ministers “do something” but all the government has done so far is call a summit with mortgage lenders on Friday. This is the default response whenever ministers of any political hue don’t know what the hell to do but want to give the public the impression they are alive to their concerns.

Sunak is adamant that direct government intervention would only make inflation worse and last even longer. He genuinely believes that and allies remind me that his record as chancellor shows he is prepared to put economics before politics and, if necessary, take unpopular decisions.

However, some Tories doubt Sunak has the political skills necessary to defuse the mortgage timebomb. One former minister told me: “It’s all very well being a Treasury man, but he needs to show some flexibility on mortgages.” Tory backbenchers are worried that Sunak’s economic pledges on inflation, debt and growth are proving much more challenging than when he made them in January. And that’s before we think about his other pledges on the NHS and small boats.

What Sunak doesn't say is that helping mortgage payers would leave less money for pre-election tax cuts – seen by Tory strategists as vital to give the party a chance of avoiding defeat next year. The chancellor Jeremy Hunt’s headroom is already shrinking, due to the government’s higher than expected borrowing costs; the picture darkened further when other statistics today showed the UK’s debt-to-GDP ratio above the symbolic 100 per cent mark and at its highest level since 1961.

For now, all ministers think they can do is ask the lenders to be more flexible with mortgage buyers so we don’t slip into a repeat of the 1990s crisis in which about 345,000 homes were repossessed. But they are right to reject Tory MPs’ demands for a return to tax relief at source on mortgage interest. That would be deeply unfair on renters, who spend a bigger slice of their (smaller) incomes on housing costs than homebuyers and are suffering even steeper increases as landlord pass on their higher mortgage bills.

Sunak's problem is that the public has high expectations that the government will intervene on mortgages because it did so on his furlough scheme and on energy bills.

Polling by More in Common, a think tank, that I have seen suggests that while inflation remains the main enemy in the public’s eyes, concerns about interest rates is on the rise. Worryingly for Sunak, the mortgage crisis could entrench his image as being “out of touch”. Luke Tryl, UK director of More in Common, told me: "When asked about competence or honesty, Sunak polls far ahead of Boris Johnson. But his achilles heel continues to be the question of whether he can relate to people’s everyday lives – with red wall voters, in particular, more likely to assume that Boris rather than Rishi can relate to them. That could become a bigger problem for the prime minister as the mortgage crunch starts to bite ushering in a second wave of the cost of living crisis, with the public already asking whether he truly understands their struggles."

Sunak is not only haunted by Johnson. The mortgage crisis shows he is also struggling to move on from the disastrous Liz Truss regime. Memories of that make it easier for Labour to hang the mortgage crisis round the Tories' necks rather than allow them to blame external events beyond their control like war in Ukraine.

The inflation figures are another black spot in what is becoming Sunak’s cruellest month as PM. They will supplant headlines about Johnson and Partygate – but only with grim economic news.

Just when Sunak hoped he had broken free of Johnson’s chains after Monday’s Commons vote in favour of the scathing privileges committee report on him, then another predecessor comes back from the dead. I suspect the Truss effect could be even more damaging than the spectre of Johnson because the mortgage crisis hits people in their pockets. Ominously, Tory MPs tell me that Truss’s mini-Budget is still an issue on the doorsteps. “She has written Labour’s narrative for it and it’s still hurting us,” one said.

Tory warnings that interest and mortgage rates would be even higher under a Labour government won’t cut much ice because Keir Starmer and Rachel Reeves have neutralised their party’s traditional weakness on the economy. The Tory attacks might have worked against Jeremy Corbyn. Not now.

Sometimes in politics, mud sticks. The last Labour government was unfairly blamed for the 2008 global financial crisis when the Tories ruthlessly pinned it on Labour. This is another such moment: the mortgage crisis will stick to the Tories, and Labour's revenge will be sweet.