![Google](http://www.google.com/images/poweredby_transparent/poweredby_FFFFFF.gif)
BANK OF ENGLAND NOW HINTS AT PROBABLE INTEREST RATE RISE IN 2014
The Unhived Mind
13 June 2014 Last updated at 07:35
http://www.bbc.co.uk/news/business-27825643
Bank of England hints at possible rate rise this year
The governor of the Bank of England, Mark Carney, has signalled that interest rates may rise this year.
In a keynote speech, Mr Carney said a rate rise “could happen sooner than markets currently expect”.
The consensus among economists was that rates would rise in the first half of next year, or even earlier.
BBC economics editor Robert Peston said that although the comments point to an increase this year, any rise “will be small and gradual”.
Mr Carney was speaking in London on Thursday at the annual Mansion House dinner attended by City and business grandees.
‘Gradual’
He acknowledged there was “already great speculation about the exact timing of the first rate hike” from their record low of 0.5%, adding that the decision was “becoming more balanced”.
Mr Carney emphasised that there was “no pre-set course” on when to raise rates. There was more spare capacity in the economy that would need to be used up first, he said.
And he also reiterated that the timing of the first rise was less important than the speed at which subsequent increases were made.
“We expect that eventual increases in Bank rate will be gradual and limited,” he said.
Speaking at the Mansion House just before Mr Carney, Chancellor George Osborne confirmed plans to give the Bank new powers to prevent the housing market from overheating.
These will include capping the size of mortgage loans compared to income or the value of the house.
The new powers would be given to the Bank’s Financial Policy Committee by the end of this Parliament, Mr Osborne said.
He said: “We saw from the last crisis the dangerous temptations for politicians to leave the punch bowl where it is and keep the party going on for too long.
“I want to make sure that the Bank of England has all the weapons it needs to guard against risks in the housing market.
“I want to protect those who own homes, protect those who aspire to own a home, and protect the millions who suffer when boom turns to bust.”
Too much risk
Mr Osborne also announced reforms to planning laws designed to increase the supply of housing. These should provide permission for up to 200,000 new homes, the government says.
The chancellor said the housing market did not pose an immediate threat to financial stability, but that if left unchecked, it may do so in the future.
George Osborne: “There is no immediate cause for alarm”
He said the risks come from homeowners borrowing too much to pay for their houses. This is a problem not just for the borrowers, but for the banks that lend them the money, he said.
There are concerns that when interest rates rise from their current record lows, many homeowners could struggle with their mortgage repayments.
Earlier on Thursday, Business Secretary Vince Cable said he was “appalled” that some banks had been lending five times a mortgage applicant’s income, suggesting a “stable level” was up to 3.5 times.
Latest figures from the Office for National Statistics found prices rising at an annual rate of 17% in London, compared with 8% in the UK as a whole. This has led to fears that an unsustainable bubble is developing in the housing market.
However, last week the Nationwide Building Society said it had seen signs that house price rises were starting to cool, while the Royal Institution of Chartered Surveyors said momentum in the housing market was beginning to slow.
theunhivedmind says:
HAVE THE VENETIAN PIRATES OF THE CITY OF LONDON HINTED AT ECONOMIC COLLAPSE IN 2014?