Newspaper article The Evening Standard (London, England)

INTEREST RATES 'LOW FOR YEARS' BANK GOVERNOR BRINGS RELIEF TO MILLIONS OF HOMEOWNERS; LEVEL TO STAY BELOW 3 PER CENT, CARNEY SIGNALS; Carney Bid to Quash Fears of Rate Increase as Jobless Total Falls

Newspaper article The Evening Standard (London, England)

INTEREST RATES 'LOW FOR YEARS' BANK GOVERNOR BRINGS RELIEF TO MILLIONS OF HOMEOWNERS; LEVEL TO STAY BELOW 3 PER CENT, CARNEY SIGNALS; Carney Bid to Quash Fears of Rate Increase as Jobless Total Falls

Article excerpt

Byline: Nicholas Cecil, Jonathan Prynn, Russell Lynch

INTEREST rates will stay below pre-economic crisis levels for years, Bank of England governor Mark Carney signalled today.

In remarks that will bring relief to millions of homeowners, he also stressed that any increase would be gradual.

Interest rates were around four to five per cent before the economic crisis erupted in 2008.

Speaking at the World Economic Forum in Davos, Switzerland, Mr Carney made clear they were unlikely to return to that level soon.

"Persistent headwinds mean that, even in the medium term, the level of interest rates necessary to sustain low unemployment and price stability will be somewhat lower than before the crisis," he told business chiefs and political leaders gathered at the exclusive ski resort.

Economists define the "medium term" as two to five years.

Mr Carney's comments suggest the Bank base rate will stay in the two to three per cent range for many years to come -- well above the "emergency" 0.5 per cent put in place since March 2009 but still historically low for Britain.

"News that interest rates won't rise any time soon, and when they do will remain lower than the 'norm' for several years, is great news for mortgage borrowers," said Mark Harris, chief executive of mortgage broker SPF Private Clients.

However, the prospect of low interest rates for the foreseeable future will dismay millions of savers.

The Bank's base rate, which has not changed for almost five years, is the benchmark for the cost of millions of loans and mortgages taken out by British borrowers.

"Market" rates tend to be a few percentage points higher than the Bank's rate. The base rate also heavily influences savings rates for investors. Mr Carney spoke out to dampen growing speculation that the Bank's monetary policy committee could hike rates as early as this year after a surprise tumble in unemployment. The jobless total fell by 167,000 in the three months to November to 2.32 million, or a rate of 7.1 per cent.

On his arrival at the Bank, Mr Carney published forward guidance that the MPC would only consider an interest rate rise once unemployment fell to seven per cent. …

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