The governor of the Bank of England has ruled out an immediate rise in interest rates because of the turmoil in the global economy and weaker-than-expected UK growth.
Mark Carney - echoing recent gloomy statements by Chancellor George Osborne - has issued a turn-of-the-year statement saying that the renewed collapse in oil prices, the volatility of China’s economy, and a moderation in wages and economic growth in the UK lead him to one overall conclusion. “Now is not yet the time to raise interest rates.”
He continued: "It is clear to me that since last summer, progress has been insufficient to warrant a tightening of monetary policy. The world is weaker and UK growth has slowed. Due to the oil price collapse, inflation has fallen further and will likely remain low for longer. It has always been the case that, because the economy is subject to unforeseen disturbances, the precise path for Bank rate rises cannot be pre-ordained."
However, Carney did mention once again what he saw as the potential risks of the UK’s buy to let sector.
He repeated past comments that “vigilance is merited” in assessing the potential risks of “pockets of more buoyant activity in areas such as buy to let mortgages, unsecured consumer credit and commercial real estate.”
Carney also added that there were three measures the Bank of England was taking to keep the housing market in check, namely:
“Limits on high Loan-to-Income mortgages introduced last year, which contributed to the share of households with very high mortgage debt to income ratios falling back to levels last seen in the 1990s, requirements for banks to assess whether borrowers could still afford their mortgages at much higher levels of Bank Rate, and the current review of underwriting standards for buy to let being conducted by the Bank’s prudential supervisors.”