Liquid error: wrong number of arguments (2 for 1) Carney predicts 400% rise in interest rates over next three years | Marsh & Parsons Sales and Lettings Estate Agents London

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Carney predicts 400% rise in interest rates over next three years

Thu 26 Jun 2014

Bank of England governor Mark Carney has indicated interest rates are set to rise 400% over the next three years. In a BBC radio interview on Friday Carney had another stab at providing guidance on the future direction of interest rates by predicting the central banks benchmark lending rate would be around 2.5% by early 2017, and that this rate would become the new normal. Currently, the Banks lending rate is at an all-time low of 0.5%, and has been for several years, as part of an attempt to revive the economy after the shock of the credit crunch. Carney has a patchy record during his tenure as governor of the Bank of England when it comes to predicting interest rate policy, but his views will be welcomed by savers. The prediction, scary though a five-fold increase in interest rates might seen, could even raise a cheer from people seeking to gain a foothold on the housing ladder, because although a rate rise would lead to increases in standard mortgage payments, it might cool down a housing market that is in danger of overheating. Figures released by the Land Registry on Friday showed the average price of a property sold in May in England and Wales was up 6.7% from a year earlier at 172,035. London house prices continue to roar ahead, rising by 2.5% in May alone, with the average sale price of 439,719 representing an 18.5% increase year-on-year. Peter Rollings, chief executive officer of London estate agents Marsh & Parsons held out some hope for first-time buyers in London, as he said price growth is beginning to slow, as a fresh supply of property comes onto the market. The latest Land Registry House Price Index shows the average house price in England and Wales now stands at 172,035, down from 172,069 in April, demonstrating the self regulatory nature of the market as it returns to normal, Rollings observed. Not only does this give buyers some breathing space from the fierce competition experienced earlier this year it is also good news for sellers who now have more choice for their onward purchase, he added. The market may or may not be working its magic on house prices, but just in case it isn't, the Bank of England on Thursday proposed limits to the amount mortgage providers could lend as part of a package of new curbs to cool the housing market. From mid-October, a cap will limit the number of home loans issued at or above a multiple of 4.5 times a borrowers salary to 15% of the total. "The measure is designed to capture risks associated with excessive household indebtedness," the Bank said. Lenders will also have to test a customers ability to pay on the basis that interest rates are 3% higher than at the time a loan is taking out.The measures, spelt out in the latest quarterly Financial Stability Report, will also apply to house buyers using the governments Help to Buy scheme.

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