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Lord Turner warns of indefinite low rates | Lord Turner warns of indefinite low rates |
(35 minutes later) | |
Former City regulator Adair Turner has warned that without radical policies, the UK economy could be stuck with low interest rates "almost indefinitely". | Former City regulator Adair Turner has warned that without radical policies, the UK economy could be stuck with low interest rates "almost indefinitely". |
He told the BBC "interest rates in the UK may not go up beyond 2% by 2020". | He told the BBC "interest rates in the UK may not go up beyond 2% by 2020". |
The Bank of England's rate has been at the record low of 0.5% since March 2009. | The Bank of England's rate has been at the record low of 0.5% since March 2009. |
Lord Turner also warned about the dangers of peer-to-peer lending, which matches individual borrowers with lenders. | Lord Turner also warned about the dangers of peer-to-peer lending, which matches individual borrowers with lenders. |
Peer-to-peer lending is one of the fastest-growing areas of financial services, which appeals to borrowers who have been turned down by High Street banks and savers prepared to take greater risks to make bigger returns. | Peer-to-peer lending is one of the fastest-growing areas of financial services, which appeals to borrowers who have been turned down by High Street banks and savers prepared to take greater risks to make bigger returns. |
"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," he predicted. | "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," he predicted. |
"You cannot lend money to small and medium sized enterprises without someone doing good credit underwriting." | |
But Christine Farnish, independent chair of the P2PFA, the industry body representing peer-to-peer lending, said Mr Turner's comments "fly in the face of the evidence". | But Christine Farnish, independent chair of the P2PFA, the industry body representing peer-to-peer lending, said Mr Turner's comments "fly in the face of the evidence". |
"Since the industry began, default on loans are low, measuring between 2-3%," she said. | "Since the industry began, default on loans are low, measuring between 2-3%," she said. |
"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," she said. | "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," she said. |
'Great nervousness' | 'Great nervousness' |
Lord Turner also said that the possibility of the UK leaving the European Union "would be adverse for the UK economy" and was already "causing major destabilisation at a global level". | |
"There is a great deal of nervousness that a UK vote for Brexit [to leave the EU] is another layer of uncertainty in an extremely uncertain world - uncertain economically and uncertain politically." | "There is a great deal of nervousness that a UK vote for Brexit [to leave the EU] is another layer of uncertainty in an extremely uncertain world - uncertain economically and uncertain politically." |
It comes less than a week after Bank of England deputy governor Ben Broadbent told BBC Radio 5 live that the expected referendum was not yet causing problems for the UK economy. | It comes less than a week after Bank of England deputy governor Ben Broadbent told BBC Radio 5 live that the expected referendum was not yet causing problems for the UK economy. |
"We have not yet seen, regarding investment intentions, any weakening of those of late, but obviously it's something we watch pretty closely," he said. | "We have not yet seen, regarding investment intentions, any weakening of those of late, but obviously it's something we watch pretty closely," he said. |
Lord Turner was chair of the Financial Services Authority until its abolition in 2013. | Lord Turner was chair of the Financial Services Authority until its abolition in 2013. |
You can hear more of his BBC interviews on Wake Up To Money and Radio 4's Today programme. | You can hear more of his BBC interviews on Wake Up To Money and Radio 4's Today programme. |