NBS, OSB: Are these stocks good bets amid rising interest rates?

Highlights

• The monetary policy committee (MPC) of the BoE is all set to raise the base rate to a 13-year high of 1%.
• An increase in monthly payments could be witnessed by approximately 2 million UK households after the 0.25% rate hike.
• Payments made by the UK households on variable-rate mortgages would increase with the rising interest rates.

 

The Bank of England (BoE) has lately been going for interest rate hikes to offset the impact of the escalating inflation levels in the UK, which reached a 30-year high of 7% recently in March. On 5 May, the monetary policy committee (MPC) of the BoE is expected to increase the interest rate by 0.25%, going for a rate hike in the meeting for the fourth consecutive time. This increase would mean that the base rate would reach its highest level in 13 years i.e., since early 2009 after the global financial crisis.

The BoE was expected to go for a 0.5% hike, but it is playing safe considering the budgets of UK households being squeezed by inflation and preventing the UK economy from heading towards recession. An increase in monthly payments could be witnessed by approximately 2 million UK households after Thursday’s rate hike to 1%. The BoE’s rate determines all the rates that are charged by other banks in the UK, including the mortgage base rate.

Payments made by the UK households on variable-rate mortgages would increase if the interest rate rose. More than 8 lakh properties in the UK are on tracker mortgages, which are aligned to the BoE’s base rate. While on standard variable rates, there are 1.1 million properties following the lenders’ set rate, which is also close to the BoE’s rate.

As per TotallyMoney’s assessment, around 25% of the UK mortgage customers are already struggling with higher payments and have no defence to counter the impact of the rate hikes.

Here are 3 UK mortgage stocks that investors can watch amid rate BoE’s rate hikes.

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 Nationwide Building Society (LON: NBS)

The shares of the British finance institution offering mortgage deals, Nationwide Building Society, closed at GBX 166.50 on 4 May 2022. The company has not performed well over the past year and its return on one-year basis as of 4 May is negative, at -8.52%. The company’s current market cap stands at £1,757.49 million. 

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 NatWest Group plc (LON: NWG)

The shares of this British bank, which is an award-winning Mortgage provider, were down by 0.41% at 11:17 AM (GMT+1) on 4 May 2022, at GBX 220.80. The FTSE 100 bank has given its shareholders a return of 12.31% over the last one year as of 4 May 2022. The company’s current market cap stands at £23,006.69 million.

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OSB Group plc (LON: OSB)

The shares of the leading specialist mortgage lender, OSB Group plc, were up by 0.36% at 11:19 AM (GMT+1), at GBX 560.50. The FTSE 250 company has given its shareholders a return of 16.97% over the last one year as of 4 May 2022. The company’s current market cap stands at £2,506.29 million.

Tags: mortgage, interest rates, BoE

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