Bank of England governor Mark Carney said that four percent of United Kingdom's mortgage holder will be vulnerable to interest rate hikes. This is due to paying more than 40 percent of their home income for ervicing the debt.
According to bloomberg.com, Carney said that even though mortgage rate hike happens, consumers don't have to worry as it will be "gently" but they still need to be prepared. He also added "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. 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 has received two different feedback from the former and current Chancellor of the Exchequer. The former chancellor, Nigel Lawson, criticized him while its current chancellor, George Osborne, praised him when he said that Britain "had harnessed the benefits" of being part of the EU. Lawson has said that Carney shouldn't be joining the politics. In which Carney answered, "Speaking as a central bank, it is very likely that Europe has advantaged the dynamism of this economy. In fact, it is without question. The British people would expect me to have something to say."
In a report by cityam.com, Carney has explained the four percent's vulnerability. He said "Historically, if you are spending more than 40 per cent of your income on debt servicing, you are vulnerable. Today we have about two per cent of households in that position. For mortgage holders it's about four per cent and we are now updating those figures. There's no certainty that they will happen, but it is a better position to be in if households expect what we think is likely to happen, and to some extent are prepared for it."
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