Mark Carney: Interest rates will rise to 2.5% within three years
Mortgage payers have been warned by the Governor of the Bank of England that interest rates are likely to increase five-fold to around 2.5 per cent over the next three years.
Mark Carney signalled that the era of ultra-cheap borrowing was coming to an end. The Bank’s base rate has been fixed at an historic low of 0.5 per cent for more than five years, but speculation has been growing that it will be raised as the economy recovers.
Mr Carney suggested that rates would stabilise around the level of 2.5 per cent rather than returning to their previous norm of about five per cent.
That could increase repayments on an average mortgage by about £2,400 a year, or £200 a month.
Stressing that increases in the borrowing rate needed to be “gradual” and “limited”, Mr Carney said 2.5 per cent was likely to become the “new normal”.
He said the financial markets were preparing for a rate of some 2.5 per cent in three years’ time.
“The Bank of England, which is at half a percentage point, historically would have moved to something akin to five per cent,” he told BBC Radio4 today.
Mr Carney said the first rise could take place this year, but said: “The big picture is not whether the Bank rate goes from half a percent to slightly above that lowest ever level.
“The big picture is where interest rates go over the medium term, because, if I’m taking out a mortgage, that’s what I care about. And if I’m thinking about investing in a new plant, if I’m thinking about hiring people, that’s what I care about, because those are the debts I have to service.”
Mr Carney warned that debt levels in Britain meant the economy remained “relatively vulnerable” to rate rises.
He said: “Our responsibility is to protect against major risks that can develop over time that can tip what is a promising economic expansion back into a recession. This is an economy that has just come off its worst recession in modern history, that is still relatively vulnerable. What’s happened in the recovery is that it has proceeded even better than we had expected.”
The Prime Minister’s official spokesman said it was important to have the right regulatory structure in place to oversee decisions on borrowing rates. He added: “The Government has sought to help all families where we can.”
Cathy Jamieson, the shadow Treasury Minister, said: “The danger is that George Osborne's failure to boost housing supply ends up forcing the Bank of England to raise interest rates prematurely to rein in our unbalanced housing market. This would hit millions of families and businesses across the country already struggling with a cost-of-living crisis.”
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Buyers beware of new-build home headaches
Are you ready for pensions reforms?
Dirty tricks in a divorce can cause some nasty surprises
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Number of serially under-performing investment funds has increased by a fifth, survey reveals
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village