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Sterling hits new high as euro plunges

The pound hit a seven-and-a-half-year high against the euro of €1.4411 on Friday, driven by comments from Bank of England Governor Mark Carney suggesting that UK interest rates are likely to rise at the turn of the year. The strength of sterling will make conditions tougher for UK exporters, widening the UK's record current account deficit. The Resolution Foundation warned that even limited interest rate increases would push households into 'debt peril', with the higher cost of servicing debt offsetting the pickup in wage growth in recent months. Research by the Resolution Foundation found that an increase in the base rate to 2.5% by 2018 would send the number of people who spend more than a third of their income on home loan repayments up from 1.1m to 2.3m. The think-tank wants safeguards for mortgage holders trapped on variable rates because of stricter lending rules limiting their options for re-mortgaging.

 

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