Governor Mark Carney, speaking in front of a Treasury Select Committee, said that the overall economic outlook had improved and a rate rise was now closer than ever.

“The point at which interest rates may begin to rise is moving closer with the performance of the economy, consistent growth above trend, a firming in domestic costs, counter-balanced somewhat by disinflation imported from abroad,” Carney said.

The central bank has held interest rates at a record low of 0.5% for the past six years, resulting in mortgage rates dropping to historically low levels.

Carney said households and homeowners should make sure they are prepared for rising borrowing costs in future but promised that rates would rise slowly.

However, a rise in unemployment announced today could further delay any rate rise.

Regardless of timing, Carney said that borrowers should not expect interest rates to return to the levels seen before the financial crisis.

“I do think there are a variety of factors that mean that the new normal, certainly over the policy horizon over the next three years, is substantially lower than it was previously,” he said. “I see no scenario in which they would move towards historic levels.”

David Miles, a member of the Bank of England’s Monetary Policy Committee – which decides when rates rise, said that an increase “clearly is coming” and it was “not a bad thing”.