Liquid error: wrong number of arguments (2 for 1) London Evening Standard: Three-year boost for home owners as Carney signals record interst rates will stay | Marsh & Parsons Sales and Lettings Estate Agents London

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London Evening Standard: Three-year boost for home owners as Carney signals record interst rates will stay

Tue 06 Aug 2013

In his first major intervention, the former Bank of Canada chief said there was still much at stake in the British economic recovery. The cost of borrowing will only be raised from its emergency level of 0.5 per cent when the rate of unemployment falls below seven per cent compared with the current level of 7.8 per cent. This is not projected to happen in official forecasts until the third quarter of 2016, well after the next election. It means homeowners who have a mortgage can plan their personal finances in reasonable confidence that their monthly interest bills will not go up.

About half of London families own their home and around a third have a mortgage. It will also allow banks and building societies to lock-in low rates on mortgages that will further boost the confidence of first-time buyers. More on this story In a note of caution Mr Carney said he was not promising to keep interest rates low for a particular length of time.? He said there would be break clauses such as out of control inflation or a period of financial -instability that could justify higher interests rates before the unemployment trigger is reached. Most City economists said Mr Carneys historic forward guidance means that interest rates are almost certain to remain where they are, possibly into 2017.

Mr Carney also unveiled upgrades to GDP growth forecasts on the back of rosier recent economic data. The Bank said growth will hit 1.4 per cent this year, compared with the May forecast of 1.2 per cent. Next year the bank expects growth to surge to 2.5 per cent, up from the May forecast of 1.7 cent, before settling at 2.3 per cent in 2015, up from 1.9 per cent. Inflation is also expected to stay lower than previously forecast and is unlikely to rise above three per cent.

The Banks Quarterly Inflation Report was peppered with cautions that recovery will be weak and figures show Britons will be 100 billion less well off than they would have been if the crash had never happened.

In the United Kingdom, a recovery appears to be taking hold, said the report. But the legacy of adjustment and repair left by the crisis means that the recovery is likely to remain weak by historical standards. The property industry gave a huge welcome to the new forward guidance which is likely to lead to a boost in house prices. Peter Rollings, chief executive of central London agents Marsh & Parsons said: This is a highly important statement which will allow lenders to offer attractive fixed rate deals to potential buyers.

But it was condemned as disastrous for pensioners and other people dependent on savings income.

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