According to the BBC website today, a senior Bank of England figure has said that interest rates could rise to 5% in “the very long term” – news that should allow home owners in Teddington and South West London to plan for their mid-long term futures with a little more confidence.
Sir Charlie Bean, deputy governor for monetary policy, called it “reasonable” to think rates would return to pre-recession levels in 10 years or more.
The rate was cut when the financial crisis hit the UK from 2007, and it has remained at 0.5% since March 2009.
Bank of England governor Mark Carney has said it could now rise, possibly to a “new normal” of 2.5% by 2017.
‘Gradual and limited’
In an interview with Sky News, Sir Charlie, who will step down from his Bank of England role on Monday, was asked if the interest rate could return to 5% within 10 years.
“That may well be so. I wouldn’t want to say it will be back there in 10 years,” he said.
“It might be reasonable to think that in that very long term you would go back to 5% but it’s probably quite a long way down the road.”
He also said that in the run-up to the financial crisis, economists were “not sufficiently cognisant of the risks building up”.
But he said the economy was now far more resilient than when he arrived at the central bank in 2000.
On Friday Mr Carney said that any interest rate rises in the coming years would be done in a “gradual and limited fashion”.
He said UK household debt levels had altered the financial system, and increasing interest rates would have more impact on household spending than in the past.