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Highlights
- Higher cost of living has triggered the shift to borrowing from saving.
- 30% of adults are now finding it difficult to afford housing costs with rising loans or mortgage payments.
Britons are struggling with the cost-of-living crisis as food and energy prices in the country have touched an all-time high. The rising expenditure has triggered the shift to borrowing from saving, as people are now forced to spend more than they did a year ago. According to a survey conducted by the Office of National Statistics (ONS), 17% of people in March were borrowing more, while 43% said they would not be able to save in the coming 12 months.
Among the hardest hit are those paying off a loan or mortgage. According to the ONS data, 30% of adults are now finding it difficult to afford housing costs with rising loans or mortgage payments. Almost 19% of borrowers reported an increase in their mortgage payments in March 2022. Moreover, the payments for people who secured a mortgage on a Standard Variable Rate (SVR) must have increased due to a rise in the average floating mortgage interest rate, which has climbed up by 0.2 percentage points since November last year.
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Banks tightening mortgage affordability tests
Meanwhile, the banks have started to review the amount they lend to the mortgagors, making it even tougher for people to borrow. The tightening of the mortgage affordability tests for UK homebuyers will mean that they will be forced to reduce the size of their loans and in turn, fuel a slowdown in the country's real estate market.
Let's take a look at some FTSE-listed mortgage lenders and how their stocks are performing.
Lloyds Banking Group Plc (LON: LLOY)
The Edinburgh-headquartered retail and commercial banking group is one of the largest financial services providers in the UK. The group lent over £16 billion to more than 80,000 first-time homebuyers in FY2021. It reported a statutory profit after tax of £5.9 billion, while its solid net income stood at £15.8 billion during the year.
Lloyds Banking Group's shares were up by 2.79% at 8:12 am GMT+1 on 26 April 2022, at GBX 46.66. The FTSE 100 constituent has given its shareholders a return of 6.49% over the last one year as of 26 April 2022. At present, the company has a market cap of £31,704.06 million.
NatWest Group plc (LON: NWG)
NatWest Group provides financial services in multiple countries and is among the four banking majors in the UK. Recently, it regained a majority stake through an off-market purchase of ordinary shares worth £1.2 billion from the UK government.
NatWest's shares were up by 2.25% at 8:37 am GMT+1 on 26 April 2022, at GBX 223.10. The FTSE 100-listed company has given a return of 14.90% over the last one year to the investors, and its current market cap stands at £23,075.86 million.
OSB Group Plc (LON: OSB)
OSB Group is an FTSE 250-listed company that provides financial services like mortgages, savings products, and credit consultancy to commercial and retail clients. The business delivered a solid performance in 2021, with its net interest income climbing to £587.6 million. The underlying net loans increased to £21.08 billion during the period.
OSB Group’s shares were trading at GBX 574.50, 1.23% higher at 8:50 am GMT+1 on 26 April 2021, with a market cap of £2,538 million. In the last one year, it has given a return of 20.34% to the shareholders.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
Tags: mortgage stocks, Lloyds Banking Group Plc, NatWest Group, OSB Group
