Bank of England governor Mark Carney has said Britain should be prepared for interest rates to be hiked, but it was by no means certain that the historically low rate would be raised.
He warned that there were households at risk due to large amounts of debt - as many as four per cent of mortgage holders - and that real wages have yet to return to pre-crisis levels.
"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 (taking into account inflation) have not come back to their level before the crisis," he said in an interview with the Mail on Sunday.
"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."
Carney said that any interest rate rise will be "steady", "modest" and "gentle".
‘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. If events mean that does not happen and rate rises are not appropriate, then we will do the right thing and we will not adjust rates," he added.