Hold on to your mortgages – interest rates are going up
Bank of England Governor Mark Carney has said interest rates are expected to rise “at the turn of this year”.
Over the next three years, he’s anticipating a return to about half the historical average – roughly 2%. However, he said shocks to the economy could throw the timing out.
Carney said the bank’s Monetary Policy Committee will “have to feel its way as it goes”.
“Short term interest rates have averaged around 4.5% since around the Bank’s inception three centuries ago,” the BoE governor said.
“It would not seem unreasonable to me to expect that once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historic averages. In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.”
“Carney is trying to harm the UK”
The move was sharply criticised by former Monetary Policy Committee member Danny Blanchflower who said interest rates should be kept at around 0.5%.
“It may well be that the US Federal Reserve is going to put off raising so it seems rather strange that Carney is trying to harm the UK by raising interest rates hurting mortgage holding and strengthening the pound. It seems a rather strange thing to do, I would have advised against it,” he told the BBC.