Carney Suggests 3 Per Cent Interest Rates

Carney Suggests 3 Per Cent Interest Rates.

In a meeting with the Treasury Select Committee, Governor of the Bank of England, Mark Carney, has suggested that comments made by fellow Monetary Policy Committee Member, Charlie Bean, that interest rates could to between 2% and 3% pa were “not unreasonable”.

When questioned on how interest rates would rise, Mr Carney suggested that they would rise in 0.5% pa stages.

On the matter of quantitative easing, Mr Carney suggested that this would only be scaled back when the economy was on a stable and interest rates had at least notched up to 1%pa.

Comment

It is only a few years ago that interest rates were at the 3%, 4% and 5% levels.  We do not see this as a “doomsday” scenario.  Most homeowners have interests rates on mortgages at the 4% plus level anyway and our loans and credit cards are already charged at the 10% - 20% pa mark.

Mortgages rates do have a historical track record of averaging around the 7-8% mark, so we suggest that people should budget already for this.  If you are not already doing so, makes plans to increase your mortgages payments now to reflect higher rates.  If you are paying your mortgage payments today as if interest rates were 8%, then when this reality actually arrives, you will be used to managing on this budget.

We recommend all clients revisit their mortgage payment schedule and plan for interest rate changes early.  Make no mistake, in 2015 or 2016 rates will increase.