The lending market works when there is certainty. If everyone knows rates will be at a certain level - high or low - lenders will lend and borrowers will borrow. Its when there is uncertainty in the market that it grinds to a halt. Commercial real estate lenders have stopped lending in certain regions of the US until there is more certainty on rates. One example - when you get a commercial floating rate loan, many lenders require, and borrowers want, a rate cap (which essentially is a forward transaction in the market or other derivative). Rate caps have doubled in price over the past couple months. If you add an extra $500,000 to your borrowing cost for a mid-sized commercial loan, it doesn’t make sense, especially if you think that the cost reflects market uncertainty rather than a true reflection of rates.
Good point. I think lots of people don’t believe the UK’s current fiscal plan is sustainable.