In response to the government’s loose fiscal plans and the resulting weakening in the pound, we now think that interest rates will rise from 2.25% now to a peak of 5.00% (4.00% previously). Rates at those levels make the housing market look very vulnerable. That’s one reason why we doubt interest rates will rise to the peak of 6.00% priced into the market, although it could also mean that the Bank of England pivots to interest rate cuts before our current forecast of sometime in 2024.
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