- After the mini-budget, the Bank of England has indicated that it may raise the interest rates once again in order to bring down the inflation rates.
- This has resulted in many of the mortgage providers withdrawning offers on several products.
The mini-budget announced by Britain’s Chancellor Kwasi Kwarteng in September has sent the financial markets into a tizzy. The huge tax cuts worth around £45 billion led to concerns among investors about the government's plans to fund them. There are concerns that the move will increase inflation, pushing the Bank of England to raise the interest rates again.
An increase in the interest rates would mean that banks would also raise their lending rates. In anticipation of this, several lenders have pulled back offers on mortgages, sparking fears of a slowdown in the property market. Homebuyers, too, are gripped by panic after the Bank of England recently reaffirmed its commitment to bring inflation under control, saying that it will not hesitate to raise the interest rates further if required.
© 2022 Kalkine Media®
According to a report by data firm Moneyfacts, mortgage lenders have scrapped about 40% of available products since the mini-budget was presented on 23 September. The company said that the average mortgage rates for a fixed tenure of about 2-5 years have hovered around 2% for some time. However, the same mortgage rates are now approaching 5%. This has more than doubled the repayments for homebuyers.
Home loans provider Nationwide has said that the average house price in the UK jumped 9.5% in September from a year earlier. However, when compared to August, it was flat. Analysts have also projected that the prices will likely slump in the coming months after surging in recent times.
Kalkine Media® explores two mortgage stocks in the wake of this information that investors can consider.
Nationwide Building Society (LON: NBS)
The mutual financial institution offers several financial services in the country, including mortgages, personal loans, current and saving accounts, credit cards, etc. The building society has a market cap of £1,250.83 million as of 3 October. Over the past year, its stock price slumped nearly 40%, while the year-to-date return stands at -37.77%.
OSB Group plc (LON: OSB)
The specialist mortgage lender primarily focuses on specific sub-segments of the mortgage market. It is listed on the FTSE 250 constituent and currently enjoys a market cap of £1,838.33 million as of 3 October 2022. It has a positive EPS of 0.76. Over the past 12 months, its share price has fallen by more than 16%, while the year-to-date return is further down at -24.51%.
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.