BoE's Dale: Loan demand hit by breakdown of trust The Bank of England's chief economist has tried to ease concerns that the recovering UK economy will trigger an imminent rise in interest rates. However, Spencer Dale said many companies may be reluctant to borrow because they were "let down by their banks during the financial crisis." Speaking at a CBI lunch yesterday, he said: "The reluctance of some companies to borrow from their banks may be less a lack of demand and more a breakdown of trust." Under the Bank's strategy of forward guidance, rates will remain at their record low of 0.5 per cent until unemployment falls to 7 per cent, providing inflation is kept under control. The strengthening economic environment and falling jobless rate has raised fears that interest rates will rise more quickly than expected, but Bank governor Mark Carney told a Treasury select committee meeting last month that the 7 per cent unemployment rate "is a threshold, not a trigger." Dale also moved to assure businesses, telling his audience that interest rates will not rise "until we have seen a prolonged period of strong growth, unemployment is significantly lower and real incomes are higher." He took some commentators to task for claiming that forward guidance had "failed" because of the improving outlook, adding: "Strong growth, falling unemployment - if that's failure, I wish I'd failed long before now." Dale attributed the recovery to the wider availability of credit and reduced uncertainty about the prospects for the eurozone. He added that the central bank is better equipped to deal with the risks posed by Britain's housing market, which he said had a "microwave-type" ability to "turn from lukewarm to scalding hot in a matter of a few economic seconds." The Bank recently announced that its Funding for Lending scheme, which offers cheap funds to banks on condition that they pass on the benefits to customers, will withdraw its support to the mortgage market next year and will instead focus on boosting the supply of credit for small businesses.