Here’s the odd thing about interest rates - we all care about them, but they don’t directly affect that many people any more.
This week’s Bank of England base rate rise is the second in three months and, if analysts are to be believed, merely the latest in a series of hikes expected throughout 2022. Consultancy Hargreaves Lansdown even forecasts the base rate by next Christmas will be five times the level at the start of this year.
And coming on top of increasing talk of a cost-of-living crisis and other whopping price rises - notably the energy price cap rise, of course - interest rate increases seem the icing on a very bad-tasting cake. Surely this will hit the housing market?
Well, maybe - or maybe not.
I’ve written in recent weeks that I believe it’s the energy price cap that will really hurt the housing market because it’s large and the figure is beyond most people's experience of inflation. We’ll all remember a price cap rise of 54 per cent, which will make a few quid on the monthly mortgage payment appear chicken feed.
While base rate rising from 0.25 per cent in early 2022 to 1.25 per cent in 12 months looks like a hefty rise (should it happen) it’s still well within most homeowners’ affordability and - crucially - their experience of interest rates in the past.
The incoming Thatcher government in 1979 - at a time when politicians, and not the Bank of England, controlled the rate - took base rate up to an eye-watering 17.0 per cent, and it floated at or above 10 per cent for many years thereafter.
So 1.25 per cent by the end of 2022? In isolation, it’s not that bad.
And remember that half of all homes are owned outright so their owners have no mortgage at all; of the rest, around three quarters of owners have fixed rate mortgage deals, meaning their repayments won’t change until their current deal ends.
That leaves some two million owners either on mortgages described as having standard variable rates or tracker deals – for both of these groups, repayments are likely to rise as mortgage lenders increase their rates.
Now I’m not underestimating the genuine problems even a small interest rate rise will have for some individuals and families already struggling - and we know many more are in that dreadful position now than just a few years ago.
However, I don’t feel these are sufficiently great in number to derail a housing market where the vast majority of house movers are existing owners, basking in recent capital appreciation of 10 per cent over the past year.
So why do we still care about interest rates?
Well, the critical term I used above was “in isolation.”
If we had no negative financial news other than the Bank of England’s decision, we could get past it in the blink of an eye.
But it comes on top of what is fast becoming a car crash for the economy.
We have Brexit-fuelled supply problems, some sectors still struggling their way out of the pandemic; inflation at five per cent and predicted to hit seven or more; a mish-mash of tinkering by government to soften the blow; and of course much dearer gas and electricity. And that’s before a possible war in eastern Europe.
For the property world, add in the upcoming costs of energy-efficiency modifications to homes to meet new EPC targets, and a housing market facing its first full year of no-discount stamp duty since 2019.
So it’s not because interest rates themselves matter that much any more, at least at their low levels of today - but they are important because on top of everything else, base rate increases help depress the sentiment that agents and vendors rely on.
To paraphrase a past US president, it’s not just the economy, stupid - it’s the mood music too.
*Editor of Estate Agent Today, Letting Agent Today and Landlord Today, Graham can be found tweeting about all things property at @PropertyJourn