No interest rate rise to burst house price bubble, says Carney who warns recovery is still in 'World Cup group stage'
Mark Carney says rate rise has moved closer as economy picks up
Wages now outstripping inflation for the first time in four years
But the Bank of England chief warns recovery not guaranteed
Reveals interest rate will not be used to tackle runaway house prices
Says interest rates are likely to stay low for years to come
By Tom Mctague, Mail Online Deputy Political Editor
Interest rates will not be hiked to tackle runaway house prices despite fears they are running out of control, the Bank of England's Governor Mark Carney revealed this morning.
Mr Carney said using the Bank's power to put up interest rates on people's mortgages 'would not be the right tool' to to tackle a house price bubble. He added: 'Will not target house prices.'
His remarks come amid growing fears that ordinary family homes are becoming unaffordable - even as fresh figures suggested that the economic recovery had finally taken hold.
The Bank chief warned however that the recovery had not yet made it 'through the qualifying rounds of the World Cup' despite falling unemployment, rising wages and house price increases.
Bank of England Governor Mark Carney admitted the prospect of rate rises had moved closer - but revealed they were likely to stay historically low a long time to come
House prices soared by 9.2 per cent across the country last year - and by more than 18 per cent in London.
This far outstripped the 1.7 per cent rise in average earnings in the year to March, according to figures released by the Office for National Statistics today.
Wages are, however, now increasing slightly more than inflation - currently running at 1.6 per cent - for first time in four years.
Mr Carney this morning said the Bank would only use a rate rise as a 'last resort' to tackle runaway house prices.
'We do have a range of other tools and these are tools, some of which we have a very high degree of confidence about their effectiveness,' Mr Carney said.
He said the Bank 'cannot control all aspects of the housing market', adding that has no power to build a single one of the 120,000 houses experts say are needed houses needed to meet demand.
But Mr Carney admitted that the booming economy had 'edged closer' the time when interest rates would begin rising again after more than five years at just 0.5 per cent.
Just last week the Bank held the rate at its record low for another month.
The Bank of England Governor this morning said house price rises would not influence their decision to increase interest rates
Britain’s economy has 'started to head back to normal', Mark Carney said. But he stressed that any increase would be 'gradual and limited' and warned that it 'may stay at historically low levels for some time'.
He added that the economic recovery was not yet secure. He said: ‘Securing the recovery is like making it through the qualifying rounds of the World Cup.
‘That is an achievement, but not the ultimate goal. The real tournament is just beginning and its prize is a strong, sustained and balanced expansion. Across the Bank we are setting policy in order to help win that prize for the good of the people of the United Kingdom.’
Mr Carnye's remarks prompted bookmakers to slash the odds on an interest rate rise before the General Election.
Despite the Governor's attempts to downplay the possibility, Ladbrookes cut the odds of a rate rise before May next year to 4/6. But the chances of rates staying at 0.5% until next year's likely poll have been pushed out to 11/10 from even money.
Jessica Bridge of Ladbrokes said: 'Carney's not convinced us in the slightest and the odds of a rise have been cut accordingly.'
Mr Carney's intervention this morning came after figures revealed the number of people in work has reached a record high after further falls in unemployment.
But Labour claimed the figures obscured the fact that ordinary families were still feeling the squeeze.
Employment Minister Esther McVey welcomed this morning's employment figures as more evidence that the economic recovery had taken hold
Shadow work and pensions secretary Rachel Reeves said: 'Average earnings have finally crept up above CPI inflation, though only when bonuses are included, and there is a huge amount of lost ground to catch up.
'Working people are now over £1,600 a year worse off than when David Cameron came to office and the link between the wealth of the nation and family finances remains broken.
'While the top one per cent have seen their share of national income rise over the last year, the bottom 90 per cent have seen theirs fall. It's totally out of touch for the Tories to try and claim the cost-of-living crisis faced by hardworking Britain is suddenly over.
'Thousands of people in work are struggling to make ends meet because the Government's failure to make work pay and tackle the cost-of-living crisis.'
GMB general secretary Paul Kenny added: 'GDP per head is still 5.8% below 2007 levels.
"That is the root cause of average earnings being down 13.8% in real terms since then. The pay of the bottom half of the workforce is still being squeezed. Public sector workers' pay is being frozen or increasing less than inflation."
The TUC's general secretary Frances O'Grady backed Mr Kenny - and urged the Government not to 'kid themselves' that the recovery was pulling everyone out of poverty.
She said: 'It a real concern that rising employment is failing to boost pay, which is barely growing in real terms. This should serve as a reminder to the Bank of England that this is not a full-blown recovery, and that an early rise in interest rates could choke it off.'
However the Tory employment minister Esther McVey said: 'As the recovery takes hold, more people are able to get a job or set up their own business and become the employers of tomorrow.
'Each and every person who has made a new start or hired someone new is helping to make Britain a more prosperous and confident place to be.
'We will continue to support those in and out of work who want to get on and fulfil their ambitions for a more secure future.'
Prime Minister David Cameron tweeted: 'There's more to do, but it's welcome unemployment is down again. More jobs means more financial security for people.'