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Highlights:
- The central bank has warned that amid the rise in interest rates and living costs, the mortgage crisis may aggravate further in the coming months.
- It added that the situation is presently better than before the 2008 financial crisis but may reach the same levels if mortgage rates remain at record highs.
The Bank of England (BoE) has warned Brits that the waning situation in the UK could repeat the 2008 financial crisis if mortgage rates do not come down.
The bank released its quarterly Financial Policy Summary report on Wednesday, which said that while households are presently in a better situation than before 2008, things may change if mortgage costs remain at the current highs. Due to this, some people may face mortgage pressure, along with other costs, the report added.
BoE also added that households would see more pressure in the coming months due to the continued rise in interest rates and living costs, making them vulnerable to shocks. It further said that some households would find it challenging to manage the estimated rises in the prices of essentials alongside higher interest rates.
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Economist hints at 'significant' rise
Meanwhile, a BoE economist has given indications that a bigger rise in interest rates may be on the cards next month. According to reports, Huw Pill, the central bank's chief economist, indicated that an immediate response would be required to manage inflation.
Notably, interest rates currently stand at 2.25% and may rise further. According to Moneyfacts, the average five-year fixed-rate mortgage rate presently stands at 6.29%. On the other hand, the two-year fixed-rate rate has jumped to 6.45%, the highest since August 2008.
Kalkine Media® explores two London-listed mortgage stocks that investors can look at.
Lloyds Banking Group Plc (LON: LLOY)
The leading British lender enjoyed a market cap of £26,331.38 million and an EPS (earnings per share) of 0.08 as of 13 October. Over the past 52 weeks, the FTSE 100-listed banking group has given investors a return of -19.77%. The year-to-date or YTD return is also negative at -18.70%. LLOY shares traded 0.45% lower at GBX 38.92 as of 8:49 am GMT+1 on Thursday.
NatWest Group Plc (LON: NWG)
Another major British banking and financial services provider NatWest Group holds a market cap of £20,524.18 million, and its EPS currently stands at 0.25. The lender has recently raised its mortgage rates to align with the competitors. Its shares have slipped by 13.69% and 12.16% on a 12-month and yearly basis. NWG shares traded at GBX 213.60, up 0.57% as of 9:05 am GMT+1 on Thursday.
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.
