LONDON (AP) — The Bank of England warned Wednesday that households across the U.K. are facing increasing problems from the sharp increase in interest rates but found that the country’s biggest banks are resilient enough to offer more help than they were able to before the global financial crisis 15 years ago..
In its regular health check of the economy, the central bank said British households are facing higher debt burdens as a result of rising interest rates, particularly those whose fixed-rate mortgage deals have come to an end or soon will be.
However, it said there are several factors that should limit the number of people who have to default on their mortgages. It noted, for example, that the country’s banks have more capital than they did 15 years ago to allow them to offer struggling households more financial options such as allowing borrowers to vary the terms of their loans.
The bank lifted its main interest rate by half a percentage point to a 15-year high of 5% last month and warned of further increases if inflation fails to show signs of falling back toward its target of 2%. That’s had a knock-on effect across lending markets, particularly the mortgage market.
Around 2.4 million fixed-rate mortgages are due to expire by the end of 2024, according to figures from trade association U.K. Finance. Households will be looking to lock in new deals, which as things stand, will could be at least a third more expensive
The Bank of England also found that the country’s banks are “resilient” against a scenario involving persistently high inflation, rising global interest rates, deep recessions and higher unemployment.
The bank did note that the sharp rise in interest rates in many countries and greater market volatility over the past 18 months has “created stress in the financial system through a number of channels,” including the failure of three mid-sized U.S. banks and Credit Suisse.
The Associated Press
