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Jonathan Rolande: Nothing changes, now we live in hope of better days ahead

In his latest column Jonathan Rolande reacts to the shock but much-needed pause in interest rate rises.

I suspect you, like me, breathed a huge sigh of relief when the Bank of England was going to maintain rates at 5.25%. 

There had been a lot of speculation that the Bank might sanction one final rate rise, while also announcing it would be the last one.  “C’mon” the bank says, “you’ve had 14, what harm can one more do?”


But in the end they saw sense, the rate didn’t change and the relief was palpable even if it was a seven bin equivalent - we were spared a rise that should never have been on the cards. 

We shouldn’t get over excited by the fact nothing actually changes , there is no doubt that no change actually represents very good news for the property sector when it could have been bad news. 

Mortgage holders were being put under immense pressure, unfairly in my opinion. 

Landlords were being hit hardest, with enormous rate rises that can’t be offset against income therefore making most buy-to-let property unviable. 
In recent months landlords have been evicting tenants and selling in their thousands. Very few are still buying with a view to letting. Those that have retained more often than not have pushed up rents to cover the new eye-watering mortgage payment. 

Supply is low and many landlords have fled. Many will never come back. 

The average homebuyer may see this as good news, more property for sale, fewer ‘greedy landlords’ inflating prices, creating scarcity. Those of us inside this rollercoaster business know full well, it isn’t that simple.  
And if this was an intentional rebalancing of the market, the Bank and Government have gone about it in a very odd way. 

Punishing all mortgage holders to encourage homeownership? I think not. 

In fact, this is the reason we are in the current mess.

The stark reality is that interest rates have remained too low, for too long. 

The Bank realised this error, belatedly, and have been playing catch-up ever since. With a remit to get inflation down to 2% and their only tool being interest rate hikes, they have little choice but to push rates, regardless of the consequences.
Yet 14 rate rises haven’t made a huge impact on inflation. 

That’s because the inflation we have isn’t only caused by consumer spending.

No, inflation has been caused by the huge hikes in energy costs and ironically, the very interest rate rises that were supposed to stop it. 

Businesses have not only had to pass on the extra costs of the fuel they use but also the cost of their borrowing. 

Staff have been forced to negotiate pay rises so that they can pay increased rent or a mortgage that has rocketed upwards thanks to rate rises supposed to combat inflation. 

It’s a not-so-virtuous circle. Some might call it madness. 

Thankfully, now, the Bank of England has finally realised it too. 

Breathe a collective sigh of relief. For now at least. 


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