Bank and housebuilding shares hit amid fears over mortgage rates
Banking and housing stocks plummet as investors worry about the impact of rising mortgage rates
Bank and housing stocks plummeted yesterday as investors worried about the state of the mortgage market.
Banks are under pressure on their mortgage lending as customers roll down their fixed-rate deals to higher rates, while costs rise elsewhere as well.
Analysts said the share price falls reflected market expectations that credit quality at UK banks would deteriorate as interest rates rise, although banks have said publicly they have seen no real signs of stress in their loan portfolios.
Amid a cost-of-living crisis, rising interest rates could have a devastating impact on borrowers already struggling to meet their basic monthly needs and could well lead to a rise in “mortgage inmates,” the analysts warned.
Under pressure: Banks are under pressure on their mortgage loan portfolios as customers roll over fixed-rate deals to higher rates, while costs rise elsewhere as well
Other investors believe the share price move was in response to comments from Shadow Chancellor Rachel Reeves, who said the government should force banks to help struggling homeowners repay their loans.
David Cumming, head of UK equities at Newton Investment Management, said: “Longer-term populist anti-banking rhetoric is not helping consumers or the economy.”
Barclays lost 3 percent, Lloyds fell 1.9 percent, NatWest lost 1.7 percent and HSBC lost 1.8 percent.
Homebuilders also fell as interest rate hikes drive up remortgaging costs for the 800,000 homeowners who must close a new deal this year, and will also deter buyers.
Persimmon was down 2.7 percent, Barratt was down 1.7 percent, Vistry was down 3.2 percent and Taylor Wimpey was down 1.7 percent.