BoE's Broadbent: Rates could rise fair amount before problems

Sun Oct 20, 2013 4:47pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

LONDON (Reuters) - The Bank of England has some leeway to raise record low interest rates without hitting borrowers buying homes with the help of government lending schemes, BoE policymaker Ben Broadbent said on Sunday.

The government launched a flagship loan guarantee plan earlier this month to help people buy houses, prompting criticism it could fuel a property bubble and burden buyers with unsustainable debt once rates return to normal levels.

Asked on Sky News whether he worried how borrowers will cope with higher rates, Broadbent said: "The numbers entering the scheme are relatively low. And although interest rates will at some point start to rise, you've got to remember quite how low a level we are starting from.

"I think there is a fair amount they could go up before borrowers got into great difficulties."

The central bank has kept interest rates at a record low of 0.5 percent since 2009 and has pumped 375 billion pounds ($600 billion) of new money into the economy since the financial crisis.

A cross-party committee of lawmakers has warned that the government housing schemes risk raising prices rather than supply.

In August the central bank committed to keeping rates on hold until unemployment falls to 7 percent - something it forecast would take at least three years - unless inflation threatens to get out of control.

Broadbent said that guidance could be reconsidered if inflation becomes a problem, although the central bank would only raise rates once the economy is on a secure footing.

"We want to ensure that this recovery continues…and is not choked off by a premature rise in interest rates," he told Sky News. "If, in the meantime, inflation became a problem, then that is something that could end the guidance."   Continued...

Bank of England policymaker Ben Broadbent speaks at Thomson Reuters' London headquarters, in the Canary Wharf business district in London September 26, 2011. REUTERS/Eddie Keogh