BoE warns vulnerable mortgage holders on rate rise

Four per cent of mortgage holders in the U.K. are vulnerable to a rise in interest rates as they pay out more than 40 per cent of their household income on servicing the debt, according to Bank of England (BoE) Governor Mark Carney.

Any increase in interest rates will be “gentle,” but consumers should be prepared, Carney said in an interview with the Mail on Sunday newspaper. He also defended his decision to comment on U.K. membership of the European Union and climate change, saying both were in line with his responsibilities as a central banker.

While there’s been a lot of progress paying down debt, there’s still a substantial proportion of British households carrying a lot of debt,” Carney told the newspaper. “On top of that, the fact is that real wages have not come back to their level before the crisis. If we think there is a prospect, a possibility –- that’s a possibility, not a certainty –- of rate rises, then that is far, far better to let the British people know so they can prepare.

Carney was criticized by former Chancellor of the Exchequer Nigel Lawson and praised by current chancellor George Osborne last week for his comments on the EU in a speech at Oxford, when he said Britain had “harnessed the benefits” of belonging to the bloc. Prime Minister David Cameron has promised to hold a referendum on EU membership by the end of 2017 and Lawson said Carney shouldn’t be venturing into politics.
“Speaking as a central bank, it is very likely that Europe has advantaged the dynamism of this economy. In fact, it is without question,” Carney told the Mail on Sunday. “The British people would expect me to have something to say.”

Discussing climate change is also within his remit, he said, as London is a major market for insurance and is being affected by the consequences for capital levels and premiums.
“I was in Lima with the International Monetary Fund and G20 last week and the second most talked about issue was climate change,” Carney said. “If you want to deny climate change, OK. But you can’t deny the market. If you want to deny the market, then I can’t talk to you.”