Mortgage rates may spike again after BoE's rate hike: Stocks to watch

November 04, 2022 12:15 AM AEDT | By Abhishek Sharma

Mortgage rates may spike again after BoE's rate hike: Stocks to watch — Image source: © Ximagination | Megapixl.com

Highlights:

The Bank of England has hiked interest rates to 3%, pushing them to 33-year high.

A hike in interest means higher mortgage rates, as the latter is directly dependent on the former.

Ever since the Bank of England (BoE) started raising the interest rates in December last year, mortgage rates have been on an upward trajectory. In September, when Kwasi Kwarteng came up with his mini-budget, the mortgage rates started rising sharply amid expectations that the BoE will now go for bigger hikes. Fixed-rate mortgage deals crossed the 6% mark last month.

However, the rates have started to ease since Rishi Sunak's coronation as the UK prime minister. The financial markets are cutting him some slack, as he hasn't been a strong advocate of tax cuts anyway. In fact, he is quite the opposite. Recently, Sunak called raising taxes inevitable, saying that the riches, especially, will have to pay more taxes to stabilise public finances.

The BoE unveiled its interest rate decision on Thursday, and it pushed the rates up from 2.25% to 3.0%, the highest in 33 years.

As mortgage rates are directly dependent on BoE's interest rates, they are also set to go up. This means that borrowers will have to shell out more money as their EMIs will increase.

Meanwhile, a report has claimed that homeowners are forced to cut spending to pay the mortgage amid the cost-of-living crisis. The report quoted Money Advice Trust CEO Joanna Elson saying that as homes tend to be the last thing people want to give up, they cut back on other expenses to keep the roof over their heads.

Let's explore some LSE-listed mortgage stocks now.

HSBC Holdings Plc (LON: HSBA)

A major British lender, HSBC Holdings belongs to FTSE 100 index. The bank's current market cap stands at £91,215.07 million as of 3 November 2022, while the EPS is 0.62. The stock's 12-month return and year-to-date return are currently at 2.98% and 2.04%, respectively. HSBA shares traded 0.22% higher at GBX 457.80 at 10:11 am GMT+1 after opening at GBX 454.40.

Standard Chartered Plc (LON: STAN)

Standard Chartered is another international banking group which belongs to the FTSE 100. It reported a 40% gain in its pre-tax profits in Q32022, boosted by the higher interest and mortgage rates. The lender also raised its full-year forecast from 10% to 13%. Standard Chartered has a market cap of £15,243.75 million, and an EPS of 0.61 as of 3 November 2022. The stock has given a return of 13.41% and 17.89% on a 12-month and YTD basis, respectively.

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.

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