People live in it and they either own a piece of this market or regularly pay through the nose in rent because they don’t. Residential property commands much more popular attention than commercial. If this is what happens, medium- and long-term interest rates shouldn’t turn a hair.īut if Bank Rate has to go above 5pc and/or stay at the higher level for longer than the markets currently expect, then gilt yields would rise, with knock-on effects on longer rates throughout the system, including fixed rate mortgages and the valuation yardsticks for commercial property. The financial markets expect two more 0.25 percentage point increases in Bank Rate. According to its new forecast, the UK will now avoid recession and inflation will fall sharply to only 1pc in two years’ time.

The Bank of England apparently believes in what the markets have dubbed “immaculate disinflation”. Why would it? The move had been widely expected.īut this doesn’t mean that we are now done with worries about how higher interest rates will affect the financial system. Yet last week’s decision by the Bank of England to raise interest rates by 0.25 percentage points hardly caused a stir. On both sides of the Atlantic, people have recently been acutely worried about how the banking system would cope with higher interest rates.

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