UK banks: mortgages are bringing an embarrassment of riches
Homeowners are watching UK mortgage rates soar skywards as their hearts descend to their boots. Some fixed-rate mortgagees will lose their homes when refinancings land them with monthly repayments they cannot afford.
This creates a problem for heads of UK banks. They have waited for years for better net interest income. But the sharp rather than gradual increase will come at glaring social cost. The UK’s unpredictable and vacillating government might exact vengeance via price caps, if not windfall taxes.
Lenders quickly adjusted their loan rate offers once gilt yields leapt. There are 9.5mn households with mortgages. Most are fixed-rate loans. These borrowers are confronted with increases of, on average, £500 a month for mortgage payments when they refinance, according to RBC research. That assumes the Bank of England raises interest rates another 1 per cent, and banks pass that through.
This story originally appeared on: Financial Times - Author:Tax Cognition
