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Bank of England remembers home owners rates sometime will ‘normalize’ at 5%

Sunday, January 2nd 2011 - 22:18 UTC
Full article 12 comments
Paul Fisher, member of the Bank's rate-setting Monetary Policy Committee Paul Fisher, member of the Bank's rate-setting Monetary Policy Committee

United Kingdom home owners need to prepare for a series of interest rate rises to around 5%, a Bank of England official has warned. Paul Fisher, who is a member of the Bank's rate-setting Monetary Policy Committee (MPC), said officials would like the current 0.5% base rate to rise to a “normalized” level 10 times as big.

But in an interview with The Daily Telegraph, he said “the speed at which that happens is another thing entirely”.

Fisher told the paper: “We hope people are aware that interest rates at some point will go up again and that they will head back to a normalized position.

”Now the speed at which that happens is another thing entirely. There's no reason why the pace should be more precipitative. We would only tighten quickly if the strength of the economy did demand it.

“So obviously we would not be putting up rates so quickly as to cause that sort of negative reaction. That's something we can try to anticipate and build in. So we would put rates up, see what the effect is and then judge how quickly to go”.

Asked of the goal was to get interest rates to about 5%, he added: “Yes, but the reaction of people to those changes in rates is part of the process of information that we have to build into our forecasts and policy decision.

”It's not something where we would put rates up and ignore the reaction to it.“. Fisher said he did not think a change of either 0.25% or 0.5% was going to trigger a recession. ”But what we need to do is to trigger the mindset in people that that's where rates will eventually go back to,” he added.

Minutes of the Bank's December rates meeting revealed members of the MPC were split three ways again this month when they left the 0.5% rate unchanged. But there were increasing concerns among the committee over inflation after it rose again in November to 3.3%.

They said upside risks to inflation had increased, but added that the majority of MPC members continued to believe economic conditions would bring inflation back to target in the medium term

Categories: Economy, International.

Top Comments

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  • mastershakejb

    Haha, nobody wants to buy a home in UK, if there's no demand, then of course rates on homes falls so low. LOL @ UK

    Jan 02nd, 2011 - 10:36 pm 0
  • Think

    Is this part of that “Special Relationship” the Brits always are speaking about ?

    Carefull.... they can be mean (on film:-)

    Jan 03rd, 2011 - 12:10 am 0
  • stick up your junta

    4 Bedroom house for 153 grand LOL

    South | Punta de... |Uruguay
    Country Uruguay
    Area South
    City Punta del Este
    Bedrooms 4
    Baths 2
    Built Sq. meters 250
    Total surface 1,100 Square Meters
    Code hu20843
    Price £ Pounds / Sterling 152,500

    Jan 03rd, 2011 - 12:11 am 0
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