Stocks to keep a close eye on amidst mortgage hike talks - Kalkine Media

May 26, 2023 12:49 PM BST | By Manu Shankar
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Highlights

  • UK households are all gearing up for a 5%-plus fixed mortgage deal.
  • Britain's annual CPI rate dropped to 8.7% on a year-on-year basis in April.

UK households are all gearing up for a 5%-plus fixed mortgage deal following Wednesday's inflation figures. This is expected to burden the new home buyers, and they may have to put off their purchase plans for some more time. Many experts are now predicting that if the situation persists, there may not be any two-year fixed-rate mortgages, and the rate deals will be priced at 5% in the coming weeks.

On Wednesday, the Office for National Statistics (ONS) figures showed that Britain's annual CPI rate dropped to 8.7% on a year-on-year basis in April from its current 10.1% in March. Insurance firm Nationwide is believed to have increased tracker rates by up to 0.45% from today onwards.

If the mortgage rates jump to 5%, it could further pressure the households feeling the heat of higher cost of living and inflation. Many have warned that the current situation could soon be a year of mortgage turmoil. Nationwide believes the interest rate hike will happen with the current swap rates fluctuating.

The mortgage rates have been constantly growing in the country following the disastrous mini-budget in September last year, as two-year government bonds rose to 4.7%. Similarly, the yield too spiked to a high of 4.478%.

Let's explore some mortgage stocks investors can keep a keen eye on.

Paragon Banking Group plc (LON: PAG)

The UK-based Paragon Banking Group plc is an FTSE-250 constituent with a market cap of £1,128.84 million. With an EPS of 0.65, the Paragon Banking Group plc was trading at GBX 484.40, down by -2.73% on 26 May 2023. PAG stock enjoyed a P/E ratio of 3.76, giving its investors annual returns of 1.21% at the time of writing.

OSB Group plc (LON: OSB)

Britain's specialist mortgage lender, OSB Group Plc, was witnessing a slump of -1.10% and was trading at GBX 496.00 at the time of writing. The OSB Group plc had earnings per share 0.76, with a market cap of £2,131.37 million. The FTSE-250 constituent, on a one-year basis, gave a negative return of -3.95% and a positive return of 3.29% on a YTD basis. Although it had a low P/E ratio of 5.46, it gave an impressive dividend of 8.21%. The company's yearly dividend yield stands at 5.9%.


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