10th February 2016
The former boss of the City watchdog Adair Turner has warned that the UK economy could be stuck with low interest rates “almost indefinitely”.
In an interview with the BBC, Lord Turner said “interest rates in the UK may not go up beyond 2% by 2020”.
Next month looks set to be the seventh anniversary of the record low Bank of England base rate, which has been stuck at 0.5% since March 2009.
Lord Turner also warned about the dangers of peer-to-peer lending, a fast growing financial sector that has profited from the reluctance of the high street banks to lend to small businesses.
Savers are increasingly lending their own money via peer-to-peer platforms in a bid to beat the dismal rates on offer by mainstream accounts.
Lord Turner said: “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.”
“You cannot lend money to small and medium sized enterprises without someone doing good credit underwriting.”
However, Christine Farnish, independent chair of the P2PFA, the trade body for peer-to-peer lender, dismissed Lord Turner’s warning.
She said the comments “fly in the face of the evidence”, adding: “Since the industry began, default on loans are low, measuring between 2-3%.
“We only lend to creditworthy consumers and established small and medium-sized enterprises. Strict credit underwriting rules apply to all our members and this should not be confused with higher-risk forms of crowdfunding or lending to sub-prime customers.”
Lord Turner further warned that fears of a Brexity could be “adverse” to the UK economy and was already creating ” major destabilisation at a global level”.
He said: “There is a great deal of nervousness that a UK vote for Brexit is another layer of uncertainty in an extremely uncertain world – uncertain economically and uncertain politically.”