Interest rates to peak at 5.5 per cent this month - but remain there for up to nine months, Handelsbanken chief economist predicts

Mr Sproule, a former business adviser to Boris Johnson when he was Prime Minister and a past Chief Economist and Director of Policy at the Institute of Directors, said: “We’ve got a rate meeting on September 21 and we expect it to go to 5.5 per cent and I think that will be the top.

"We have been saying 5.5 per cent for quite a while now and others have suggested it could go to 6.5 per cent or something silly like that. It is not.

"These interest rate rises take a long time to filter through and the very rapid rises in interest rates we have had mean we are going to have an ongoing effect on the property market and the general public.

"I think this will be weighting down on the economy for the next year or so. I don’t think they need to go higher.”

When asked his view on how long interest rates will stay at 5.5 per cent for, Mr Sproule said: “We think it is probably going to be at least six to nine months.

"They will start cutting in late spring next year. The reason it will stay a bit higher than that is because if we look at the two big elements of inflation – one has been energy prices but the other element is wages which have just gone positive for the first time since November 2021.

"The Bank of England is very concerned about a wage-price spiral but I think we are some way from that.

"What we could see and I expect we will see is interest rates remaining at that 5.5 per cent for a bit longer than people expect because you will have that wage-price pressure coming through. That’s what I suspect the Bank will do.”

He said he believes interest rates had been overdue the increases they have seen in recent months after years of hyper-low rates in the wake of the 2008 financial crisis.

"I don’t think 0.1 per cent was sustainable and I was on a shadow Monetary Policy Committee for long time and I was always saying, ‘Put rates up’ because money has to have a cost. If it has no cost people use too much of it.

"When money had no cost at all people were using for reasons where investments really weren’t making sustainable returns.”

Mr Sproule was in Leeds for events this week with current and prospective clients of Handelsbanken, a Swedish based ‘relationship bank’ typically catering for businesses, property entrepreneurs and high net-worth individuals which has 14 branches in Yorkshire.

He said that despite the higher cost of borrowing and associated ongoing falls in property prices that good investment opportunities are becoming available.

"I would to say to clients that this is a brilliant time to calm down, get your finances in order and some time in the next couple of years there will be some really great opportunities coming up and wouldn’t it be good if you were in position to take advantage of those?

"One of things about property, whether it is residential or commercial, is if the right opportunity comes up it would be foolish to wait three months to get three per cent off the price because if you do somebody else will pick the opportunity up.”

He said his visit to Yorkshire is part of an ongoing programme of engagement with clients of Handelsbanken up and down the country to help inform their investment decisions.

Mr Sproule, who has been with the bank since 2020, sai d he also gets a lot out of the events.

“I probably 150 presentations around the country a year. I was in Inverness last week talking about Scottish property and here are we more interested in property in this part of the country.

"We do a lot of that and I really enjoy coming and enjoying talking to lots of clients, which I find really informative.

"You can look at the numbers but when you talk to people actually doing the business that provides extremely good insights.”