Interest rates are expected to be cranked up today – but is that the right thing to do?

Trevor Abrahmsohn says it is folly to increase interest rates today without giving the last 13 increases a chance to make their full effect felt.

Trevor-Abrahmsohn-Bank-of-England interest rates

The Bank of England were not the quickest off the mark to crank interest rates upwards in 2021/22 when the early warning signs of inflation were apparent, as demand rapidly picked up unexpectedly after Covid.

But I think it is folly to increase them this week without giving the last thirteen increases a chance to make their full effect felt.


Fixed rate mortgages were first offered in 1989, in the middle of the then recession, and they have remained popular ever since. Particularly as interest rates had rock bottomed in 2020.

This effectively means that the effect of high interest rates will be less immediate and will probably take 12 to 18 months to fulfil their efficacy.

It’s like double dosing a patient with medicine.”

Relentlessly increasing them before this has had a chance to work, is like double dosing a patient with medicine that could exacerbate the harm done from the ailment.

The Monetary Policy Committee at the Bank of England has a twitchy finger on the tiller of the good ship UK Economy but maybe a more sanguine approach to the outlook would be well advised.


Undoubtedly, we are going to see more and more casualties that emanate from the effect of the credit crunch and this will continue unabated until inflation and rates come down over the next few years.

Inflation is already headed southwards, albeit a little too slowly for some observers.

However, I think that time, the great healer, needs to play its part before we become too trigger happy.

Both homeowners and landlords are struggling.”

Lenders are trotting out some interesting fixed rate mortgages which anticipate the downward trend in interest rates in a year or two’s time and this will take the pressure off homeowners and buy-to-let landlords – both struggling at the moment with a high cost of borrowing not assisted by the cost-of-living crisis.


Personally, I don’t believe that there will be a cataclysmic drop in values of residential property, as I think that they will probably ease by 5-10% over the next year to 18 months but certainly not more than this.

What may underpin the market is a noticeable and persistent limited supply of properties available to buy, which should certainly serve to stabilise values.

There are no signs of this trend at the moment.”

In the past, prior to any recession there has been a noticeable increase in homes for sale accompanied by shrinking demand and that is where values have subsequently fallen, precipitously. There are no signs of this trend at the moment.

The middle classes are considering selling their homes before the full negative effect of a change of government next year is felt, as they don’t want to be trampled in the stampede which could take place if the electoral polls continue to point towards a Labour Party victory in 2024.

Trevor Abrahmsohn (main picture) is founder and MD of London estate agency Glentree International

One Comment

  1. Need to let the previous interest rate increases work through the system. Most fixed rate mortgages haven’t ended yet so the increases are just hitting the same people every month and they are already struggling. Once the 2, 3 & 5 year fixed finish there will be many more people with less money which will slow inflation. Also the rate increases are not helping to reduce production costs or transport, hearing fuel etc which are the main reason for the inflation – not over- spending. It’s like we have an infant in charge of rates that doesn’t understand what they are doing. Clearly the BoE has a different agenda here, driven by the election year in 2024. Everyone wants to be able to look like the good guys next year as the voting public have short memories. And please don’t tell me the BoE is not influenced by the government!

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