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Highlights:
- Lenders have continued to hike mortgage rates in anticipation of aggressive rate hikes by the Bank of England.
- Following chancellor Jeremy Hunt's reversals of a majority of tax cuts, there were hopes that mortgage rate hikes may ease.
In his first act as the Chancellor of the Exchequer, Jeremy Hunt on Monday made a major announcement. He ripped up the mini-budget with a plethora of tax cut reversals that were brought forward by his predecessor Kwasi Kwarteng. Hunt's move was aimed at calming the financial markets, which have witnessed significant turbulence ever since the mini-budget was announced.
The mini-budget sent the pound sterling to a record low against the US dollar and also pushed the UK's bond market into a damaging tailspin. It led to lenders raising their interest rates in anticipation that the Bank of England may hike the interest rates aggressively to control the situation.
Image source: © Webking | Megapixl.com
Mortgage rates have hit decade-high levels in the past few weeks. While Hunt's tax cut reversals were expected to calm the markets, the pressure on the mortgage market is yet to be eased. In fact, lenders have raised the mortgage rates even after Hunt's emergency fiscal statement.
There were hopes that lower borrowing costs after the U-turn on tax cuts would impact the lenders' pricing. Despite this, lenders proceeded with the rate hikes for fixed-rate mortgage deals. Three of the country's biggest lenders, including TSB, Barclays and NatWest, announced an increase in the fixed-rate deals on Tuesday. While these hikes were signed off by executives before Hunt's announcement on Monday, they were announced on Tuesday.
Amid the rising mortgage rates, investors can look at the following stocks selected by Kalkine Media®.
Barclays Plc (LON: BARC)
The multinational bank belongs to the FTSE 100 index and offers several banking and financial services. Its shares were down 2.73% at GBX 143.32 as of 9:39 am GMT+1 on 19 October. The stock's 12-month return is presently at -28.16%, and the year-to-date or YTD return is at -23.36%. It has an EPS of 0.38, while the market cap stands at £23,382.92 million.
NatWest Group Plc (LON: NWG)
Another prominent British lender is the NatWest Group, which owns several brands like the NatWest, Royal Bank of Scotland, etc. The FTSE 100 constituent has a market cap of £22,872.29 million and an EPS of 0.25. The stock's one-year return currently is -8.62%, and the YTD return is -5.58%. As of 9:47 am GMT+1 on Wednesday, the stock traded at GBX 229.30, down 3.13%.
OSB Group plc (LON: OSB)
The specialist mortgage lender has a market cap of £1,760.05 million, and it belongs to the FTSE 250 index. The stock value has tumbled by 26.04% in the past 12 months, while the YTD return is at -32.44%. OSB shares were trading 7.96% lower at GBX 374.60 as of 9:51 am GMT+1 on 19 October.
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.
