Bank chief sig­nals interest rate rise

Daily Express - - NEWS - By Sarah O’Grady Prop­erty Cor­re­spon­dent

THE first interest rate rise in a decade is on the way, the gov­er­nor of the Bank of Eng­land re­vealed yes­ter­day.

Mark Car­ney sig­nalled that a hike from its his­toric low could be on the cards as early as Novem­ber, when the Bank’s Mon­e­tary Pol­icy Com­mit­tee next meets.

He said: “We are talk­ing about just eas­ing a bit off the ac­cel­er­a­tor to keep with the speed limit of the econ­omy.

“So interest rate in­creases – when and if they come – will be to a limited ex­tent and in a grad­ual way.”

Any rise would be the first since July 2007. The rate was low­ered to 0.25 per cent in Au­gust last year.

A rise would mean mil­lions of home­own­ers fac­ing higher monthly mort­gage re­pay­ments as lenders pass on the in­crease.

On the av­er­age mort­gage of £122,000, an in­crease of 0.25 per cent would in­crease monthly pay­ments by £15 to £665 – equiv­a­lent to £180 over the course of a year.

Mr Car­ney’s warn­ing, in an in­ter­view on Ra­dio 4’s To­day pro­gramme, was echoed by Bri­tain’s big­gest build­ing so­ci­ety. Robert Gard­ner, chief economist at the Na­tion­wide, said: “A near-term rate hike is becoming more likely.

“Most econ­o­mists and fi­nan­cial mar­ket pric­ing now sug­gest that a small rise of 0.25 per cent is likely.

Dan­gers

“Fi­nan­cial mar­ket pric­ing sug­gests that the bank rate is only likely to rise by around one per­cent­age point, to 1.25 per cent, over the next five years.”

Most new mort­gages are on fixed interest rates.

The share of mort­gages on vari­able rates has fallen to its low­est level on record, at 40 per cent, down from a peak of 70 per cent in 2001.

Mr Gard­ner thinks the im­pact of a small rate rise on UK house­hold bud­gets would be “mod­est”.

In his ra­dio in­ter­view, Mr Car­ney also warned of the dan­gers of “reck­less” lend­ing to con­sumers, with a 10 per cent rise in such debt.

Mr Car­ney said there was a “pocket of risk” around credit card bor­row­ing, plus per­sonal and car loans.

He added: “We are wor­ried about the shift from what has been re­spon­si­ble lend­ing to reck­less lend­ing.”

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