Mark Carney: interest rates to rise sooner than expected

Chancellor gives Bank of England new powers to restrict mortgages as Mark Carney warns on rates

Governor of the Bank of England Mark Carney
(Image credit: Dan Kitwood - WPA Pool /Getty Images)

The first rise in interest rates since the wake of the financial crisis may come sooner than expected, the Bank of England governor Mark Carney has warned.

Carney hinted that they could rise before the end of the year, amid growing concerns about a housing bubble.The need for internal balance, to use up "wasteful spare capacity" while achieving the inflation target of two per cent, will "likely require gradual and limited interest rate increases", he said. "The start of that journey is coming nearer."In his first Mansion House speech last night, Carney also warned that the housing market is now "the greatest risk to the domestic economy".The move to increase interest rates will provide some "long-awaited relief to savers but plunge many borrowers into difficulty", says the Daily Telegraph.Chancellor George Osborne has also announced new powers for the Bank of England to restrict mortgage lending. "Does the housing market pose an immediate threat to financial stability today? No, it doesn't. Could it in the future? Yes, it could, especially if we don't learn the lessons of the past," he said.Osborne announced new rules to increase the supply of housing by encouraging building on brownfield land and new powers for the Bank to impose limits on the loan-to-income ratios for mortgages."I say today, very clearly: the Bank of England should not hesitate to use these new powers if they think it necessary to protect financial stability," he said.Osborne has not set a level for any cap, but Carney suggested he is unhappy with banks lending some customers four or five times their annual salary.

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