LONDON – The Bank of London has confirmed a surge in interest rates on loans for the first time since it was established in 2015, raising the prospect that interest rates for unsecured loans are likely to rise again in the coming months.
The increase in mortgage rates came as the central bank reported a record £8.6bn surplus in the financial year ended March.
The Reserve Bank of Australia has said it expects its interest rate rises to be weaker in 2019.
“In a recent commentary on the UK mortgage market, the Bank of Canada and the Bank for International Settlements (BIS) have both reported that they expect the UK’s borrowing costs to rise to a level not seen since the early 1990s, the height of the global financial crisis,” Bank of Britain Governor Mark Carney said in a statement on Thursday.
Carney also added that the Bank was expecting to see interest rates rise for mortgage finance and the non-performing loan market.
A rate rise would come as the UK continues to recover from the impact of the financial crisis, but is also likely to raise concerns about the sustainability of the economy.
Carney said the central banks decision on the timing of interest rates would help to shape the future of the housing market in the UK, which was once a key driver of the country’s economy.
The bank is also reviewing the impact that a rise in interest rate will have on households’ borrowing costs, which could impact on the ability of banks to lend to households and businesses.
The Bank’s decision on rates has been in the pipeline for several months and will have a significant impact on households and business lending.
The decision to increase interest rates is expected to be welcomed by economists and business groups.
The UK government has been pressing the central bankers for a rate rise, and the decision by the bank comes as the country continues to struggle to contain the effect of the UKs economic recovery.
The country’s unemployment rate hit a record high of 12.1% in April, according to official figures, and is expected continue to rise.