Households face higher interests rates for 'foreseeable future', says former Bank of England boss

All borrowers can expect to pay higher interest rates "for the foreseeable future" former Bank of England boss Mark Carney tells ITV News Political Editor Robert Peston

The government and mortgage holders can expect to pay higher interest rates "for the foreseeable future", former Bank of England governor Mark Carney has told ITV1's Political Editor, Robert Peston.

Households are braced for a further boost in rates – which already sit at a 14-year-high of 4.5% – from the Bank of England next week.

The central bank’s monetary policy committee (MPC) will vote next week over another potential increase to interest rates, with economists widely predicting they will back a 13th consecutive rise.Higher-than-expected wage rises have stoked further suggestions that inflation could be more persistent than expected and potentially threaten the government’s pledge to halve inflation in 2023.

Speaking on ITV 1's Peston, Mr Carney said: "I think one of the things that governments in the UK and Canada, 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, you know, 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 of time."

'Governments are going to have to get used to paying high interest rates for the foreseeable future,' Mark Carney tells ITV1's Peston

ITV News Political Editor Robert Peston suggested that would leave mortgage payers paying higher interest rates for a number of years.

Mr Carney confirmed stating: "That's a good working assumption. So if you have still a few years of low interest rates on your mortgage, if you fixed just at the right time, as it turns out, yeah, recognise that there will be an adjustment over the medium term. It's a question of degree but the direction is very clear."

The former Bank of England boss also weighed in on AI, likening the steps taken in the sector to the industrial revolution, warning that 'restructuring' the way we see Artificial Intelligence could help limit people being displaced from jobs.

It comes after Jeremy Hunt said the UK has “no alternative” but to raise interest rates in an effort to bring down inflation.

The chancellor told Sky News: “We understand that there is real pressure on families with mortgages, on businesses with loans, as interest rates go up.

“We are doing what we can to help people through a difficult patch.

“In the end, there is no alternative to bringing down inflation if we want to see consumers spending, if we want to see businesses investing, if we want to see long-term growth and prosperity.

“And that’s why we will be unstinting in our support for the Bank of England as they go about their job to bring down inflation.”

Downing Street confirmed the government is "conscious about the potential for a wage-price spiral" and that difficult decisions are thus required in public sector pay.

The prime minister’s official spokesman said: “We are working with the Bank of England to drive that down – they are ultimately responsible for setting interest rates.”

Economists predicted that the central bank will have been put on edge by continued high inflation and are likely to hike rates to at least 5%, with the financial markets currently pricing in a peak potentially at 5.5%.

Watch the full interview on tonight's edition of Peston, on ITV1 and ITVX at 10.45pm

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know.