{"id":1680845,"date":"2022-10-10T01:52:38","date_gmt":"2022-10-10T05:52:38","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1680845"},"modified":"2022-10-10T01:53:13","modified_gmt":"2022-10-10T05:53:13","slug":"analysis-british-banks-mortgage-payday-comes-with-sting-in-the-tail","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/analysis-british-banks-mortgage-payday-comes-with-sting-in-the-tail\/","title":{"rendered":"Analysis-British banks\u2019 mortgage payday comes with sting in the tail"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">20<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fanalysis-british-banks-mortgage-payday-comes-with-sting-in-the-tail%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1680845&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>By Iain Withers, Sinead Cruise and Lawrence White<\/p>\n<p>LONDON (Reuters) \u2013     While British households head into a winter of soaring energy costs, a tumbling currency and nearly double-digit inflation, the country\u2019s banks are in line for a handsome payday as mortgage prices spike after a decade of stagnation.<\/p>\n<div id=\"div-gpt-ad-1663871513696-art-1\">\n<\/div>\n<p>Banks are finding the home loan market stacked in their favour after years of low mortgage rates, but are also aware that bigger mortgage bills could spell trouble for cash-strapped customers.<\/p>\n<p>Some investors and analysts are already questioning whether banks\u2019 risk models are up to the task of identifying loans that will turn a profit from those which could cost lenders dearly in the long run.<\/p>\n<p>\u201cThe problem is people refinancing at 6%, who were at say 2%, are going to suffer massive outflows of cash to support those mortgage payments,\u201d said John Cronin, banking analyst at Goodbody.<\/p>\n<p>\u201cMy worry is that the banks\u2019 provision models don\u2019t adequately reflect that affordability challenge in the context of low unemployment.\u201d   <\/p>\n<p>Britain\u2019s mortgage market was plunged into chaos last month when the country\u2019s new finance minister Kwasi Kwarteng unveiled a so-called \u201cmini-budget\u201d that promised billions of pounds of unfunded tax cuts.<\/p>\n<p>Markets took fright at the prospect that this would mean vast government borrowing, sending UK government bond prices tumbling, and driving bets on higher interest rates.<\/p>\n<p>The turmoil led banks to withdraw nearly 1,700 mortgage products in the space of a week \u2013 equivalent to around 40% of available products \u2013 sparking a rush among consumers desperate to secure the cheapest possible deals.<\/p>\n<p>One senior banker said they had seen three times as many remortgage applications than normal in the week after Kwarteng\u2019s mini-budget, and had to redeploy staff to cope with a spike in customer calls.<\/p>\n<p>Some of the deals pulled were gradually reintroduced this week at rates between one to two percentage points higher.<\/p>\n<p>Both the average two-year and five-year fixed-rate mortgage was above 6% as of Friday \u2013 for the first time since 2008 and 2010 respectively, data provider Moneyfacts said. <\/p>\n<p>Those average rates were both around 4.75% on Sept 23 before Kwarteng\u2019s fiscal giveaway, and were between 2-3% in October last year, Moneyfacts data showed.<\/p>\n<p>Graphic: Soaring UK mortgage rates https:\/\/graphics.reuters.com\/BRITAIN-BANKS\/myvmndxdgpr\/chart.png<\/p>\n<p>Banks are raising mortgage rates to get ahead of expected Bank of England rate rises, with money markets pricing in benchmark rates hitting nearly 6% next year, based on Refinitiv data.<\/p>\n<p>But the higher rates will hit borrowers hard.<\/p>\n<p>\u201cEveryone who rolls off fixed on to variable, or fixed on to a new fixed rate, is going to see their monthly payments go up so dramatically on top of what\u2019s going on already around food and energy costs,\u201d said Jim Leaviss, CIO of public fixed income at investment manager M&#038;G.<\/p>\n<p>\u201cIt is hard to see that we won\u2019t see a substantial slowdown in economic activity over the coming months and indeed throughout 2023,\u201d he added.<\/p>\n<p>Mortgage payments as a proportion of gross household income were on average around 20% in June, according to BuiltPlace, a property market consultancy. They could rise to around 27% \u2013 the highest since the early 1990s \u2013 if mortgage rates were to rise to 6%, the consultancy said.    <\/p>\n<p>Mortgage market conditions were a \u201chot topic\u201d of discussion at a meeting between bank executives and Kwarteng on Thursday \u2013 with affordability \u201cthe overriding concern\u201d, according to a source briefed on the discussions.<\/p>\n<p>SHORT TERM GAIN, LONG TERM PAIN<\/p>\n<p>Banks benefit from higher rates as they earn money from the difference between what they charge on lending and pay out on deposits.<\/p>\n<p>Jefferies\u2019 analysts estimated that three of Britain\u2019s largest retail banks \u2013 NatWest, Lloyds and Barclays \u2013 stood to collectively grow their revenue by 12 billion pounds ($13.43 billion) by 2024 due to expanding margins, including on mortgages. These banks reported 48 billion pounds in revenues in 2021.<\/p>\n<p>Lloyds CEO Charlie Nunn told a banking conference last month \u2013 prior to Kwarteng\u2019s mini-budget \u2013 the lender gained around 175 million pounds of revenue for every 25 basis point rise in rates \u2013 assuming it passed just half of the increases to savers.<\/p>\n<p>Bank loan defaults have remained remarkably low through the pandemic and after, but much higher housing costs \u2013 piled on to soaring energy bills \u2013 could change that, analysts said.<\/p>\n<p>British banks are expected to have \u201ca very good next couple of quarters\u201d before a \u201ctough\u201d 2023, bank analysts at RBC said in a note.<\/p>\n<p>Taking into account the latest mortgage pricing, RBC calculated that mortgage payments would increase by between 470 pounds and 250 pounds per month for remortgaging households depending on whether they had refinanced before.<\/p>\n<p>Private rents could also go up by 280 pounds per month if landlords passed on higher mortgage costs to tenants, the RBC analysts said.<\/p>\n<p>The rise in mortgage rates will be a blow for millions of households\u2019 finances, Sue Anderson, head of media at debt charity StepChange said.<\/p>\n<p>\u201cOur research suggests many households can ill afford this extra pressure \u2013 nearly one in two British adults are struggling to keep up with household bills and credit commitments, up from 30% in October 2021 and 15% in March 2020.\u201d<\/p>\n<p>British lenders have held talks with industry trade body UK Finance about forbearance options for struggling customers, the trade body told Reuters, adding it was ready to react as required.<\/p>\n<p>The senior banker said that while mortgage defaults were still low \u2013 home loans were typically the last commitment consumers fell behind on \u2013 they were not complacent.<\/p>\n<p>\u201cWe expect it to be larger scale than normal, and it\u2019s not started yet.\u201d<\/p>\n<p>($1 = 0.8937 pounds)<\/p>\n<p> (Reporting by Iain Withers, Sinead Cruise and Lawrence White. Additional reporting by Andy Bruce in London. Editing by Jane Merriman)<\/p>\n<p><a href=\"https:\/\/www.oann.com\/uncategorized\/analysis-british-banks-mortgage-payday\/attachment\/file-photo-britains-house-prices-boom\/\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/10\/tagreuters.com2022binary_LYNXMPEI99055-BASEIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI99055-BASEIMAGE\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Iain Withers, Sinead Cruise and Lawrence White LONDON (Reuters) \u2013 While British households head into a winter of soaring energy costs, a tumbling currency and nearly double-digit inflation, the<\/p>\n","protected":false},"author":66,"featured_media":1889642,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1680845","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_finder_url":"https:\/\/www.oann.com\/uncategorized\/analysis-british-banks-mortgage-payday\/?utm_source=rss&utm_medium=rss&utm_campaign=analysis-british-banks-mortgage-payday","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1680845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1680845"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1680845\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1889642"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1680845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1680845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1680845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}