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Loan Demand Increases

Written By On 04/04/2014

Mark Carney could not dismiss the potential of an interest rate increase before next year’s general election.

The Bank of England governor made it quite clear that there can be no guarantees when the bank will begin to raise UK interest rates. He emphasised that there will be no political link to next May’s general election.

Mr Carney stated:

We have been as explicit as we can about the nature of adjustments to interest rates, but we can't be specific. But we are absolutely clear that it will happen independent of the political cycle.

He added:

We will set policy as appropriate to meet our core responsibility to meet the two per cent inflation target. We haven't set timing conditions on when that will be.

The governor accepts that many people with mortgages and loans will be very upset when interest rates start to go up, but he believes it will be a positive move for the economy if it happens at the correct time.

Mr Carney said:

When you raise interest rates it is a welcome sign. I share my colleague Charlie Bean’s view that it is confirmation the economy is recovering after some very difficult years.

Meanwhile the Bank of England are anticipating greater demand for mortgages and home loans in the coming months. .

They just announced the results of their most recent quarter’s credit conditions survey. It showed availability of secured credit of households in the first quarter of 2014 increased for the seventh time in a row.

Their survey for the same quarter appertaining to availability for loans to businesses was also up for the sixth time in succession. The BOE are forecasting further growth in the next quarter.

Matthew Fell from the CBI, was encouraged by the figures and said:

Banks have a crucial role to play in the economic recovery and must step up to the plate and support lending to smaller firms too.