It is "not unreasonable" for investors to anticipate a 2% base rate as early as 2016, but increasing rates is still considered a last resort to tame the housing market, according to Bank of England policymaker David Miles.
Miles, a member of the Bank's Monetary Policy Committee (MPC), said it would exhaust other measures before acting to up rates from their historic lows of 0.5%.
"In terms of a generalised overheating housing market, I don't think that's a good description of where we are," Miles told Bloomberg TV.
"If you did get into a situation where the tools that the Financial Policy Committee have seem not up to the job of stopping overheating in the housing market, we would then turn to the blunter instrument of using Bank Rate. We're a long way from that."
Miles added house price measures were being distorted by big swings in the South East and London.
Recent figures showed Britain's economy grew at its fastest pace since the financial crisis last year. However, the Bank has made it clear it is in no hurry to raise interest rates as it tries to make sure the recovery is entrenched.
However, he suggested it would be wise of borrowers and investors to begin anticipating a rise in the base rate.
"[It is] important that there is a clear recognition by borrowers and lenders that interest rates will not remain at this level for many years to come," he said. "They need to think very carefully what's going to happen when the cost of that mortgage moves up."
Miles said investor expectations for a rate hike next year and for the base rate to reach 2% by 2016 are "not unreasonable," Bloomberg reported.
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