And such incorrect expectations may then lead to unwarranted increases in housing prices and household indebtedness. But I would like to point out that it is genuinely difficult to know what will be a “normal” or average level for future mortgage rates. It is not at all certain that the Riksbank’s long-run assessments of the repo rate are more correct than those of households or other market agents. A low repo rate is necessary, despite the risks I have observed that there are risks linked to holding a low repo rate over a long period of time, and that monetary policy should in principle take these risks into account. But at the  9  At the Riksbank, we usually say that the average repo rate in the longer run can be expected to be in the interval of 3.5 to 4.5 per cent (see, for instance, the Riksbank 2013b, p. 47). Short-term mortgage rates are usually 1.5 to 2 percentage points higher. Households’ expectations of short-term mortgage rates five years ahead are now around 4 per cent. And market agents’ expectations of the repo rate five years ahead are around 3 per cent. See Figure 5 and Figure 6. BIS central bankers’ speeches  7  most recent monetary policy meetings I have nevertheless advocated cutting the repo rate even lower. There are several factors behind this stance.
In this country, it is felt most in terms of SME and mid-cap finance. Many were struck by the potential ability of financial technology – fintech – to help bridge this financing gap, but I would emphasise that there was also bit of a caution, as I believe Reverend Giles Fraser noted in the last panel. We should not get too far ahead of ourselves, but look to further evidence that it can bridge the gap. I think the Chancellor is absolutely right that fintech has potential both in terms of expertise in finance and capability in technology. If these can be married effectively, we have an opportunity. There were a few specific examples that were mentioned that I would just like to reinforce. First, and as Alex Brummer very rightly emphasised, the opportunities that come from big data and a greater open architecture that is already there. As our Chief Operating Officer Charlotte Hogg would note, the Bank of England is one of the biggest repositories of big data. There is always a question about to what extent that can be leveraged more broadly into the system, and though it is still early days, the Bank may want to consider taking this on as a challenge. Jon Cunliffe raised a separate and important issue with receivables finance, where fintech could make a real difference. Following the crisis, payment terms for companies increased to 120 days and have not come back.