Bank Of England Governor Cools Rate Rise Talk
The governor of the Bank of England has moved to cool speculation he will trigger a base interest rate rise sooner rather than later.
Mark Carney told the Treasury Select Committee (TSC) that there is additional spare capacity in the UK labour market that can be absorbed before the rate, used as a benchmark for home loans and saving, is increased.
He stressed that the timing of any rate rise is not as important as the fact any increase in the base rate will be "limited and gradual".
The pound strengthened on foreign currency markets, up against both the dollar and euro in late morning trades.
Mr Carney also stressed the importance of real wage growth to the recovery, saying "wage data is still softer than expected", adding that the latest data was giving the impression that a pick up in earnings growth could be imminent.
He told the committee that he expects the base rate, in five years' time, to be "materially below" the historic average of 5%. It currently sits at a historic low of 0.5%.
TSC member and Labour MP Pat McFadden said the bank's shifting position on rates was like an "unreliable boyfriend - one day hot, one day cold".
In recent days Mr Carney has hinted that a rate rise may occur in coming months. Many analysts expected a rise before the end of 2014.
Deputy governor Charlie Bean also told MPs that all of the bank's Monetary Policy Committee members were struck by the markets' high degree of certainty before June 12's Mansion House speeches, where hints on a rise were given.
Mr Carney's TSC comments come as new figures have been released showing the impact of the Mortgage Market Review rules starting to bite.
The sector most affected has been those trying to get a better deal with current providers or swapping to another lender for a more competitive rate.
The number of homeowners re-mortgaging their properties has dropped 11% in a month, according to the British Bankers' Association (BBA).
It said approved re-mortgages in May reached 18,206, down 11% on April's figure of 20,448.
The BBA said that in comparison, the number of house purchase mortgages remained virtually flat in May, at 41,757.
On Monday, big homebuilders and property management firms were hit as investors started to shift out of the sector, fearing a slowdown in construction.