UK borrowers, from mortgage-payers to the government itself, will face high interest rates for years to come, a former Bank of England governor has predicted.
Mark Carney, who ran the Bank from 2013 to 2020, has warned that “big tectonic shifts in the global economy” mean the cost of borrowing – which has jumped over the last 18 months – will remain high for a while.
Carney told ITV’s Peston show last night: "One of the things that governments in the UK, and Canada, elsewhere have to get used to, now, is that they are going to be paying higher rates of interest for their debt for the foreseeable future.
"Not just measured in 12 months, 24 months, but actually, the big tectonic shifts in the global economy mean that we are likely to have higher longer-term interest rates for a period."
And if governments face higher long-term borrowing costs, it’s a “good working assumption” that everyone else will, too, Carney agrees.
He says borrowers should recognise this: "If you have still a few years of low interest rates on your mortgage, if you fixed just at the right time as it turned out, recognise that there will be an adjustment over the medium term.
"It’s a question of degree but the direction is very clear."
The Bank of England is widely expected to raise interest rates again at its policy meeting next week.
It has already raised interest rates 12 times in a row, to 4.5%, the highest since 2008.
This morning, the money markets are predicting interest rates could be near 5.75% by the end of this year.
Yesterday the chancellor, Jeremy Hunt, warned that the UK has “no alternative” but to raise interest rates to bring down inflation, which was 8.7% in April.
Carney’s comments come as UK mortgage lenders continue to lift the cost of their deals.
Inflation is a problem beyond the UK, of course. In the eurozone, consumer prices rose by 6.1% in the year to May, which is likely to prompt the European Central Bank to raise its key interest rates today.
We will hear from the ECB president, Christine Lagarde, later.
The agenda
• 9.30am BST: latest UK real-time economic activity and business insights
• 10am BST: eurozone trade balance for April
• 1.15pm BST: European Central Bank interest rate decision
• 1.30pm BST: US retail sales for May
• 1.45pm BST: European Central Bank press conference
We’ll be tracking all the main events throughout the day ... |
