Cost of borrowing will be higher for foreseeable future, former BoE Governor Mark Carney warns

Former Bank of England Governor Mark Carney has warned that higher interest rates look set to stay for the foreseeable future as the global economy adapts to a new normal.

Being interviewed on ITV’s Peston show Carney said Government and individuals would both feel the pinch of increased borrowing costs.

He told host Robert Peston: “I think one of the things that Governments in the UK, Canada and elsewhere have to get used to now, is that they are going to be paying higher rates of interest for their debt for the foreseeable future.

“Not just measured in 12 months, 24 months, but actually, the big tectonic shifts in the global economy mean that we are likely to have higher longer-term interest rates for a period.”

Asked by Peston if higher borrowing costs for Government would translate into higher cost for consumers Carney said: “That’s correct, that’s a good working assumption. If you have still a few years of low-interest rates on your mortgage, if you fixed it just at the right time as it turned out, recognise that there will be an adjustment over the medium term.

“It’s a question of degree, but direction is very clear.”

As things stand 2-year fixed rate mortgages have an average rate of 5.9%, for 5-year fixes it’s 5.54%. But with a number of lenders currently repricing this figure will increase in the coming days.

As of this morning, money markets are pricing in a base rate of 5.75% by early next year.

The next announcement on rates from the Bank of England is due in a week’s time on Thursday 22nd June.