Higher borrowing costs will force Britons to cough up more cash as interest rates soar, the former Governor of the Bank of England has warned.
Mark Carney, 58, who headed up Britain’s central bank from 2013 to 2020, also warned persistently high interest rates would ensure consumers and the Government pay more to service off debt.
"I think 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, you know, 12 months, 24 months," he told ITV.
"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 of time."
Mark Carney, UN Special Envoy on Climate action and Finance, and Co-Chair, GFANZ, speaks during the Net Zero Delivery Summit at the Mansion House,
PA
When pushed on whether the situation would leave mortgage payers paying higher interest rates for a number of years, the Canadian-born economist added: "That's a good working assumption.
“So if you have still a few years of low interest rates on your mortgage, if you fixed just at the right time, as it turns out, yes, 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 set the current interest rate at 4.5 per cent and policy chiefs will meet to discuss hiking the levy later this month.
Persistently high inflation rate could lead the Bank of England to hike interest rates for the thirteenth consecutive timePAThe Bank has pushed through twelfth consecutive increases as the UK continues to grapple with high inflation amid the cost-of-living crisis.
An increment of 0.25 per cent is expected to be implemented as interest rates hit 4.75 per cent, experts have suggested.
The figure hit five per cent during the height of the 2008 financial crash.
Traders anticipate the base rate to peak at 5.5 per cent by the end of the year.
Mortgage rates could increase further as the Bank of England is set to hike interest ratesPAIn contrast, the base interest rate was as low as 0.1 per cent in late 2020 and early 2021.
The current economic situation is almost certainly damaging the Conservative Party’s standing in the opinion poll, with strategy firm Stonehaven handing Labour a 15-point lead over the Tories amongst homeowners.
The Conservative Party attracted support from around 44 per cent of homeowners in 2019 but the figure collapsed to just 29 per cent in the recent survey.
Prime Minister Rishi Sunak has pledged to halve inflation by the end of the year in a move which many hope will cut interest rates.
Food inflation is particularly taking its toll on British pocketsPAThe headline consumer price index held firm at 8.7 per cent in April, down from 10.1 per cent in March.
Inflation peaked last October at 11.1 per cent, the highest figure since Britain was crippled by stagflation in 1978.
The Prime Minister’s official spokesman said: “We are working with the Bank of England to drive that [inflation] down – they are ultimately responsible for setting interest rates.”
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