What is the extra cost to the banks? Mortgages are refinanced by banks: they borrow money for shorter terms than they lend it. This means that their costs of providing these mortgages will rise.
Today banks borrow money to lend out, they need deposits. That idea of banks just creating money when they lend is soooo yesterday, Possibly tomorrow too, but not today.
Despite all these disastrous outcomes, the financial markets have now priced in a rate rise to 4% by next May meaning, in other words, that they think that the Bank of England is mad enough to increase its interest rate with all these consequences being likely.
And actually, so do I think that they are that mad because there is no evidence to persuade me otherwise.
It’s a terror, isn’t it? That interest rates might rise to minus 12%?