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Interest rates could rise ‘sooner than markets expect’

Joanna Faith
Written By:
Joanna Faith
Posted:
Updated:
18/03/2015

The governor of the Bank of England has warned interest rates “could rise sooner than markets expect.”

In a speech on Thursday, Mark Carney said the eventual increase in the bank rate will be “gradual and limited”.

The base rate has been stuck at 0.5% since March 2009. The general consensus among experts is that the rate will not rise until the first half of 2015.

Carney acknowledged there had been “great speculation” around the exact timing of an interest rate rise but said the decision is becoming “more balanced”.

He also said the Bank is concerned about the indebtedness of over-extended borrowers, who could “threaten the resilience” of the financial system.

However, he said raising interest rates now would be would the “wrong response”.

“Fortunately, we are not up the proverbial creek without a paddle,” he said.

Also speaking at the annual Mansion House dinner, Chancellor George Osborne confirmed plans to give the Bank of England new powers to cap mortgage loans as a share of family incomes or the value of the house.

“If the Bank of England thinks some borrowers are being offered excessive amounts of debt, they can limit the proportion of high loan to income mortgages each bank can lend, or even ban all new lending above a specific loan to income ratio,” Osborne said.