Former Bank of England chief Mervyn King says households have been living in a ‘fool’s paradise’ as they assumed low interest rates would last forever.<\/p>\n\n\n\n
Households have been living in a ‘fool’s paradise’ because they have mistakenly assumed low interest rates would last forever, former Bank of England chief Mervyn King said this weekend.<\/p>\n\n\n\n
Lord King warned rates are returning to ‘normal levels’. <\/p>\n\n\n\n
But he insisted the economy will benefit from the change and that central banks ‘should not try to stand in the way’. <\/p>\n\n\n\n
The veteran of the financial crisis was governor of the Bank of England for a decade until 2013. His opinions are still highly regarded and often shape public discourse.\u00a0<\/p>\n\n\n\n
There are two further rates decisions before Christmas and markets have already pencilled in an increase to as much as 6 per cent next year. <\/p>\n\n\n\n
That has sent mortgage costs rocketing. The average two-year fixed deal reached 6.47 per cent on Friday \u2013 the highest since the financial crisis in 2008 \u2013 while the average five-year deal was 6.29 per cent. <\/p>\n\n\n\n
Lord King said: ‘We have been in a fool’s paradise where people seem to believe we could have very low interest rates indefinitely.’ <\/p>\n\n\n\n
‘The adjustment has to take place one way or another and central banks cannot afford to back off on the grounds that, ‘Gosh, assets are falling, this is a terrible surprise.<\/p>\n\n\n\n
The benchmark rate, which is set by the Bank and began the year at 0.25 per cent, rose by 0.5 percentage points to 2.25 per cent last month as inflation soared.<\/p>\n\n\n\n
Speaking to the Australian Weekend newspaper, he said the recent volatility which has rocked pension funds was ‘an inevitable consequence of a return to more normal levels of interest rates, which ought to be very welcome. Central banks should not try to stand in the way. <\/p>\n\n\n\n
‘The repricing is going to have significant impacts on portfolios of many investors, including the pension funds that we have seen struggle in London. These pension funds are now being caught out.’ <\/p>\n\n\n\n
The Bank of England launched an emergency \u00a365billion bond-buying programme to bail out funds that had been relying too heavily on complex financial products \u2013 liability driven investments, or LDIs. <\/p>\n\n\n\n
‘There will be quite a debate as to why the pension funds were allowed to borrow a great deal through embedded leverage in derivative transactions,’ he said. <\/p>\n\n\n\n
Households are struggling with a cost of living crisis and energy and food bills rise. <\/p>\n\n\n\n
More than five million families could see annual mortgage payments increase by \u00a35,100 by the end of 2024, according to a report last week. <\/p>\n\n\n\n
Former Chancellor Kwasi Kwarteng’s botched mini-Budget, which prompted the Bank of England’s action, sparked market volatility that pushed up the cost of Government borrowing and spurred the increase in mortgage rates.<\/p>\n","protected":false},"excerpt":{"rendered":"
Former Bank of England chief Mervyn King says households have been living in a ‘fool’s paradise’ as they assumed low<\/p>\n","protected":false},"author":1,"featured_media":6965,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[90,65],"tags":[],"class_list":["post-6964","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-national-news"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2022\/10\/download-1-1.jpg","jetpack-related-posts":[{"id":11360,"url":"https:\/\/prowebinhost.com\/anzu\/stanbic-bank-cuts-interest-rates-in-new-oil-sorted-campaign\/","url_meta":{"origin":6964,"position":0},"title":"Stanbic Bank cuts interest rates in new \u2018oil sorted\u2019 campaign","author":"UgandaUpdate","date":"January 29, 2024","format":false,"excerpt":"Kampala, Uganda \u2013 January 29, 2024 To stimulate economic activity, Stanbic Bank Uganda has announced a new lending campaign dubbed Oli Sorted, aimed at facilitating Ugandans to access affordable credit to finance their personal and commercial needs. Israel Arinaitwe, the Head of Personal Banking at Stanbic Bank said after the\u2026","rel":"","context":"In "Oil and gas"","block_context":{"text":"Oil and gas","link":"https:\/\/prowebinhost.com\/anzu\/category\/oil-and-gas\/"},"img":{"alt_text":"","src":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2024\/01\/dogo2-scaled.jpg","width":350,"height":200,"srcset":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2024\/01\/dogo2-scaled.jpg 1x, https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2024\/01\/dogo2-scaled.jpg 1.5x, https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2024\/01\/dogo2-scaled.jpg 2x, https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2024\/01\/dogo2-scaled.jpg 3x"},"classes":[]},{"id":16613,"url":"https:\/\/prowebinhost.com\/anzu\/key-insights-ahead-of-bank-of-ugandas-march-treasury-bond-auction\/","url_meta":{"origin":6964,"position":1},"title":"Key Insights Ahead of Bank of Uganda\u2019s March Treasury Bond Auction","author":"UgandaUpdate","date":"March 4, 2026","format":false,"excerpt":"By Alex Kakande On March 18, 2026, the Bank of Uganda will auction four treasury bonds. This auction will be one of the last in the 25\/26 financial year, with only three more auctions scheduled in April, May, and June to close out the year. For those who monitor the\u2026","rel":"","context":"In "National News"","block_context":{"text":"National News","link":"https:\/\/prowebinhost.com\/anzu\/category\/national-news\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3339,"url":"https:\/\/prowebinhost.com\/anzu\/will-bou-supervising-mobile-money-stop-the-cruel-2-loss-by-users\/","url_meta":{"origin":6964,"position":2},"title":"Will BoU Supervising Mobile Money Stop the Cruel 2% Loss by Users?","author":"UgandaUpdate","date":"May 25, 2021","format":false,"excerpt":"BY OUR SPECIAL CORRESPONDENT The Bank of Uganda has taken the bold, necessary step to take over supervision of the mobile money operations in the country. Accordingly, BoU has issued operating licenses to MTN and Airtel under the National Payment Systems Act 2020. The move was indeed overdue, possibly an\u2026","rel":"","context":"In "Economy"","block_context":{"text":"Economy","link":"https:\/\/prowebinhost.com\/anzu\/category\/economy\/"},"img":{"alt_text":"","src":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2021\/05\/Mutebile-.jpg","width":350,"height":200,"srcset":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2021\/05\/Mutebile-.jpg 1x, https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2021\/05\/Mutebile-.jpg 1.5x"},"classes":[]},{"id":13160,"url":"https:\/\/prowebinhost.com\/anzu\/governments-bond-auction-strategy-a-tale-of-missed-targets-and-higher-yields\/","url_meta":{"origin":6964,"position":3},"title":"Government’s Bond Auction Strategy: A Tale of Missed Targets and Higher Yields","author":"UgandaUpdate","date":"October 30, 2024","format":false,"excerpt":"By Alex Kakande Today\u2019s Auction results are out; however this article digs deeper and shades light on the Government strategy on raising Funds through Treasury Bonds borrowing. The Treasury department mishandled its financing projects at the beginning of the month by accepting less money in the bond auction on October\u2026","rel":"","context":"In "National News"","block_context":{"text":"National News","link":"https:\/\/prowebinhost.com\/anzu\/category\/national-news\/"},"img":{"alt_text":"","src":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2024\/10\/4776_LOGO.jpg","width":350,"height":200},"classes":[]},{"id":14420,"url":"https:\/\/prowebinhost.com\/anzu\/may-2025-auction-treasury-bonds-investments-up-for-grabs\/","url_meta":{"origin":6964,"position":4},"title":"May 2025 Auction – Treasury Bonds Investments Up For Grabs","author":"UgandaUpdate","date":"May 7, 2025","format":false,"excerpt":"By Alex Kakande Two and a half weeks after the Bank of Uganda, along with the Treasury Department, rejected highly placed long-term treasury bond bids in last month's auction\u2014despite significant oversubscription of close to 1.4 trillion UGX\u2014the Bank of Uganda is back with the May auction, as per the scheduled\u2026","rel":"","context":"In "National News"","block_context":{"text":"National News","link":"https:\/\/prowebinhost.com\/anzu\/category\/national-news\/"},"img":{"alt_text":"","src":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2025\/05\/bonds.jpeg","width":350,"height":200},"classes":[]},{"id":5677,"url":"https:\/\/prowebinhost.com\/anzu\/udb-begs-tour-operators-to-borrow-at-only-8-as-sh44billion-lies-unwanted\/","url_meta":{"origin":6964,"position":5},"title":"UDB Begs Tour Operators to Borrow at only 8% as Sh44Billion Lies Unwanted","author":"UgandaUpdate","date":"May 18, 2022","format":false,"excerpt":"For some reasons which include tedious bureaucracy, UDB is stuck with 44 billion shillings which it wants to lend to tour operators at 8%, which is extremely low by Ugandan standard. Ugandans are used to 20 plus interest rates which in reality mount to 25% because of different fees banks\u2026","rel":"","context":"In "National News"","block_context":{"text":"National News","link":"https:\/\/prowebinhost.com\/anzu\/category\/national-news\/"},"img":{"alt_text":"","src":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2022\/05\/bank.jpg","width":350,"height":200,"srcset":"https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2022\/05\/bank.jpg 1x, https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2022\/05\/bank.jpg 1.5x, https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2022\/05\/bank.jpg 2x, https:\/\/prowebinhost.com\/anzu\/wp-content\/uploads\/2022\/05\/bank.jpg 3x"},"classes":[]}],"jetpack_shortlink":"https:\/\/wp.me\/pc0aOV-1Ok","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/posts\/6964","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/comments?post=6964"}],"version-history":[{"count":1,"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/posts\/6964\/revisions"}],"predecessor-version":[{"id":6966,"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/posts\/6964\/revisions\/6966"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/media\/6965"}],"wp:attachment":[{"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/media?parent=6964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/categories?post=6964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prowebinhost.com\/anzu\/wp-json\/wp\/v2\/tags?post=6964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}