Mortgage stocks to watch as house sales plunge

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Mortgage stocks to watch as house sales plunge

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 Mortgage stocks to watch as house sales plunge
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Highlights

  • On Thursday, BoE lifted the interest rate by 0.5 percentage points to 2.25%.
  • Following Thursday's rate hike, an average buyer getting a £300,000 home with a £280,000 mortgage would have to pay £65 additionally per month.
  • House sales in the UK may go down soon as mortgages appear to reach the most unaffordable level recorded since 1990.

House sales in the UK may go down soon as mortgages appear to reach the most unaffordable level recorded since 1990, experts have cautioned. On Thursday, the Bank of England (BoE) lifted the interest rate by 0.5 percentage points to 2.25%, the highest rate since 2008.

As per estate agency Savills, the monthly mortgage bill faced by Brits has gone up by £349 on average since the beginning of 2022, lifting it to £1,150. Following Thursday's rate hike, an average buyer getting a £300,000 home with a £280,000 mortgage would have to pay £65 additionally per month, ballooning to an added amount of £780 per year.

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According to a study conducted by analysts at BuiltPlace, UK houses could now be in their most unbalanced state with earnings since the early 90s, owing to the swiftly rocketing mortgage rates. The difference between the mortgage bill on a typical UK house and what an average buyer would have been able to pay was already 17% in July.

The affordability crunch is already impacting home buyers. Mortgage rates for buyers moving into the market have now surpassed 4% already. While home affordability becomes difficult, UK investors can evaluate the performance of the following mortgage stocks. 

OSB Group plc (LON: OSB)

The company's market cap focused on underserved sub-sectors of the mortgage market, OSB Group plc, stands at £2,212.23 million as of Friday. With an EPS (earning per share) of 0.76, the FTSE 250 company's return on a one-year basis stands at 1.60. Meanwhile, its YTD  return as of 23 September is at -9.56%. Enjoying a low P/E ratio of 5.93, the company's yearly dividend yield stands at 5.9%. OSB shares were trading at GBX 501.00 on Friday, witnessing a dip of 0.69% at around 9:20 AM (GMT+1). 

Real Estate Credit Investments Limited (LON: RECI)

The market cap of the specialist investment firm focused on European real estate credit markets, Real Estate Credit Investments Limited, stands at £318.77m as of Friday. With an EPS of 0.16, the company's return on a one-year basis stands at -10.26. Meanwhile, its return on a YTD basis as of 23 September stands at -8.79%. Enjoying a P/E ratio of 12.97, the company's yearly dividend yield stands at 8.6%. RECI shares were trading at GBX 138.00 on Friday, witnessing a fall of 0.72% at around 9:50 AM (GMT+1). 

Paragon Banking Group plc (LON: PAG)

The market cap of the leading British provider of mortgages and personal loans, Paragon Banking Group plc, stands at £1,160.34m as of Friday. With an EPS of 0.65, PAG’s one-year return stands at -12.94. Meanwhile, its return on a YTD basis as of 23 September stands at -14.70%. Enjoying a P/E ratio of 6.25, the company's yearly dividend yield stands at 5.8%. PAG shares were trading at GBX 483.20 on Friday, witnessing a plunge of 0.49% at around 9:55 AM (GMT+1).

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