The UK's Q4 2023 banking crisis.

[Bobthebuilder]

@sancho panza re Natwest.

Not sure if this is relevant to the thread.

I have an offset mortgage with them, got informed this week that the product has been locked as it were. I can continue with mine as it is, but any changes to it from here on, such as additional lending, house move etc, will result in the deal ending and I would have to apply for a new deal either with them or another lender.

Not sure if they are stopping offsets or just dont want me as a customer anymore, as they are not making a penny out of mine, despite the mortgage rate being 8.25%.

[sancho panza]

3 hours ago, Bobthebuilder said:

@sancho panza re Natwest.

Not sure if this is relevant to the thread.

I have an offset mortgage with them, got informed this week that the product has been locked as it were. I can continue with mine as it is, but any changes to it from here on, such as additional lending, house move etc, will result in the deal ending and I would have to apply for a new deal either with them or another lender.

Not sure if they are stopping offsets or just dont want me as a customer anymore, as they are not making a penny out of mine, despite the mortgage rate being 8.25%.

I think it's relvant when products that haevbeen in existence for 10-15 years get pulled.

As you allude Bob,I think it's probably down to profitability dissappearing.A lot of the people taking our offsets would have reserves soemwhere and with rising rates have merely brought thsoe reserves back.

Im not sure how the risk weighting of them works.

[sancho panza]

BTL arrears rising pretty sharply at 29% p.a.Still small in nominal terms.

Resi holding up due to fixed rates/forebearance etc.

BTL curve will move over to the resi in time imho

Looking at the analysis posted ehre there have been sharp rises in stage 2's (deterirorating)that have yet to mvoe to stage 3(default).And remember many of these were pre 2012 vintage.Later loans still being marked stage1 performing

https://uk.finance.yahoo.com/news/buy-let-hit-homeowners-dodge-133403048.html

Buy-to-let hit but homeowners dodge mortgage arrears bullet

The latest figures on mortgage arrears and repossessions make for interesting reading. But not for the reasons you would imagine at this stage of the property and interest rate cycles.

Sure, the number of loans in arrears representing at least 2.5% of the total outstanding was up in the third quarter, according to the data from UK Finance. The total of 87,930 was 7% higher than the previous quarter.

But in historical terms they are still running at remarkably low levels given the extraordinary rise in interest rates we have seen over the past two years.

 

After the financial crisis in 2009 arrears were running at more than 200,000 and they did not fall back below 100,000 until 2016. Meanwhile the number of repossessions actually fell, from 690 to 630, barely a blip on the radar compared with the huge numbers seen in the early 1990s.

Between 1990 and 1995 around 345,000 homeowners were forced to hand back the keys. Much has changed since then. Fortunately, this time round far few homeowners have lost their jobs — the life event more likely to trigger serious problems with repayments.

The cost of living crisis has hit the living standards of millions of home owning households but they will prioritise the mortgage payments above almost anything else.

The predominance of fixed rates has also shielded millions of home owners from the worst of the Bank of England’s monetary squeeze. It has given them time to prepare for when they do have to refinance at higher borrowing costs.

The worst of the pain appears to be focused on the buy-to-let sector where mortgage rates are usually higher. Arrears were up much more sharply, shooting up 29% to 11,540.

[dnb24]

https://www.marketscreener.com/quote/stock/NATIONWIDE-BUILDING-SOCIE-15171729/news/Nationwide-Building-Society-calls-for-more-support-for-first-time-buyers-and-savers-45394138/
 

are Nationwide begging for support due to balance sheet risk?

[sancho panza]

On 20/11/2023 at 16:10, dnb24 said:

https://www.marketscreener.com/quote/stock/NATIONWIDE-BUILDING-SOCIE-15171729/news/Nationwide-Building-Society-calls-for-more-support-for-first-time-buyers-and-savers-45394138/
 

are Nationwide begging for support due to balance sheet risk?

FTBers are keeping the ponzi running.Somewhere up thread we documented 40% of laons were FTB iirc

Must say the Chancellors statements to day do look like a back door bail out of some elveraged BS's with reference to LHA rising especailly given the liks of Nationwide having £40bn BTL loan books that are 91% IO.

Nationwides Interims

Page 8-Decent rise in net interest income

page 12

page 20

page 21-£4bn uplift in loans marked stage2,stage 3's subdued though

 

page 25-some clear movement in probability default.but still at mragins

Page 26-Decent exposure to FTBers.We may get data later in the report that compares stage 1/2/3 by year of origination.From memoery -upthread-it looked like a lot of BS's were using new loans to 'purfiy the book' if you will as later year loans teneded to be dsictinctly less likely to be marked stage 2iiic.

13% exposure to new BTL-presumably they've abandoned IO for BTL??

 

Page 28-NW actually has a 45% exposure to London and SE

 

Page 30

Page 31-the rising trend in arrers is still low.Stipulating clearly that BTL laons are still 91% IO and there are £6bn IO resi laons on the book as well.

Interest only mortgages
At 30 September 2023, interest only balances of £6,374 million (4 April 2023: £6,812 million) account for 4% (4 April 2023: 4%) of the owner-occupied residential mortgage portfolio. Nationwide
re-entered the owner-occupied market for interest only lending under a newly established credit policy in April 2020; however, 82% of current interest only mortgage balances relate to historical
accounts which were originally advanced as interest only mortgages or where a subsequent change in terms to an interest only basis was agreed. Maturities on interest only mortgages are
managed closely, with regular engagement with borrowers to ensure the loan is redeemed or to agree a strategy for repayment.
Of the buy to let and legacy portfolio, £39,910 million (4 April 2023: £40,126 million) relates to interest only balances, representing 91% (4 April 2023: 91%) of balances. Buy to let remains open to
new interest only lending under standard terms.

 

page 58

[sancho panza]

UK govt on the lookkout for 'patsy's' before the sector goes pop

10% doesnt cover much downside

https://www.telegraph.co.uk/money/investing/natwest-shares-sold-public-thatcher-autumn-statement/

NatWest shares to be sold off to public in echo of ‘Tell Sid’ campaign

City veteran says a discount of up to 10pc would be needed to encourage enough demand

The public will be offered the chance to buy the Government’s shares in NatWest within a year under a scheme that echoes the “Tell Sid” privatisations of the Thatcher era.

Shares in the bank are likely to be offered at a discount to the price at which they trade on the stock market, offering savers the chance of a quick profit.

One City veteran said a discount of up to 10pc would be needed to encourage enough demand.

The plan has echoes of Margaret Thatcher’s privatisations of the 1980s, when state-owned monopolies such as BT, the electricity companies and British Gas were floated on the stock market and shares offered to the public. 

The “Tell Sid” advertising campaign for the British Gas flotation came to symbolise the privatisation drive.

[sancho panza]

good to see Im not on my own

https://www.telegraph.co.uk/news/2023/11/22/who-would-buy-natwest-shares/

Who would buy NatWest shares?

If you see ‘Sid’, tell him not to touch this load of old flannel with a bargepole

“It is time to get Sid investing again,” said Hunt. For the youthful uninitiated, that was a reference to the advertising campaign used to promote the British Gas privatisation of 1986 which involved a search for the mythical Sid with the aim of telling him to apply for some shares because they were a sure thing. And indeed the share issue was greatly oversubscribed and the share price soared after privatisation.

Alas, the same is unlikely to be true of the 39 per cent or so of NatWest stock still owned by taxpayers. That giant holding has lost value over the past year amid the great debanking row and various economic headwinds and there is little reason to expect a post privatisation boom.

Sid is probably retired by now and therefore will have been reassured by the continuation of the triple lock on the uprating of pensioner benefits. But his modern equivalents may be struggling too hard with soaring rents and the rest of the cost-of-living crisis to get excited about the possibility of buying tranches of bank shares.

The prospect of a big NatWest sell-off is highly unlikely to recreate a zeitgeist of economic optimism and excitement. Loadsamoney, double-breasted suits, big hair and all the other glorious material vulgarities of the Thatcherite age are but a distant memory. Some will even fear that buying into NatWest is more likely to involve associating with the bank’s “values” of wokery – even in the post-Alison Rose world – than in any great prospect of yielding shareholder value.

Edited November 22, 2023 by sancho panza

[Loki]

https://www.rothschildarchive.org/exhibitions/if_you_see_sidtell_him/the_legacy

[Democorruptcy]

Virgin Money having a bad day, due to rising bad loan provisions.

[sancho panza]

9 hours ago, Democorruptcy said:

Virgin Money having a bad day, due to rising bad loan provisions.

Thats a decent size rise as below.I've jsut had a scan and their results are short on tables of data and long on verbiage and pie charts......which says a lot imho.

bascially means you have to read the whole fucking thing to find the interesting bits instead of looking at the tabels that matter and oing the dedcutiosn for yourself.

https://www.msn.com/en-us/money/other/virgin-money-launches-new-150m-share-buyback-despite-rise-in-impairments/ar-AA1koQqt

Impairment losses on credit exposures jumped to £309m, up from £52m last year. The jump reflected “prudent macroeconomics,” although the bank noted “credit quality remains robust with low arrears.”

Underlying expenses of £971m were six per cent higher than last year as the bank noted “additional costs to resolve service challenges and higher levels of investment.”

Net interest income rose by £124m, up eight per cent from 2022, as the bank continued to reap the benefits of high interest rates and structural hedging.

The bank’s net interest margin (NIM) – measuring the difference between what it pays out to savers and receives in interest payments – rose 0.06 per cent to 1.91 per cent.

[sancho panza]

https://uk.finance.yahoo.com/news/chinese-shadow-bank-admits-30bn-131335939.html

Chinese shadow bank admits £30bn shortfall after ‘management ran wild’

One of China’s biggest financial conglomerates with links to the country’s ailing property market has admitted a shortfall of nearly £30bn as it warned investors that it is “severely insolvent”.

Zhongzhi, an asset and wealth management company in China’s shadow banking sector, said its total assets amounted to 200bn yuan (£22.5bn) against obligations of up to 460bn yuan, in a letter to shareholders issued on Wednesday.

China’s vast shadow banking system – which operates outside the regulations that govern traditional banks – involves selling wealth management products to retail investors. That financing then often flows into the property sector, which has faced a liquidity crisis in recent years as Beijing imposed strict limits on debt levels for property developers.

The property crisis has proved a drag on China’s economic growth, with apartments left unfinished across the country and homebuyers refusing to pay mortgages on unbuilt units.

[jamtomorrow]

Saw this and thought of you @sancho panza - reads very much like a hit piece though, which makes me wonder who commissioned it, and why:

https://www.express.co.uk/finance/city/1838394/financial-contagion-hsbc-china-hong-kong

Financial contagion warning as HSBC is told to brace for ‘catastrophic’ £6.3billion hit

Bob Lyddon fears losses in Hong Kong and China could "blow a hole in the bank's equity".

By CIARAN MCGRATH

08:00, Sat, Nov 25, 2023 | UPDATED: 20:22, Sat, Nov 25, 2023

HSBC is facing a "hit" of more than £6.3billion as a result of unsecured commercial property loans into China, a UK-based tax consultant has warned.

Bob Lyddon branded the situation a ‘disaster’ - and warned of a "financial contagion" risk which could have a knock-on effect on Britain’s economy.

HSBC earlier this month confirmed it was setting aside £910million to cover expected loan losses, including £412million related to the commercial real estate sector in China - but Mr Lyddon said the actual picture was much worse.

The founder of Lyddon Consulting Services outlined his concerns in an analysis specifically written for Express.co.uk - and has urged the bank not to underestimate the seriousness of the situation.

He explained: "HSBC's stake in its Chinese bank - Hang Seng - looks overvalued by £3.3billion given the benchmark set by Standard Chartered.

"Forty-two percent of HSBC's commercial property loans into China are either sub-standard or credit-impaired: £4.6billion out of £11billion. That's a disaster.

"The equivalent figures just for Hong Kong are 63 percent, and £3.8billion out of £6billion. That's a catastrophe."

Even worse, £3billion of this £3.8billion was not backed by real-estate security, Mr Lyddon stressed.

He explained: "That's an oxymoron: they should not be booked as real-estate lending if they are unsecured.

"Are these frauds, where a borrower has used the money meant to construct a building but the site remains vacant?

Or, if there is a building and the borrower has defaulted on the loan, are the bank's mortgage papers defective so it cannot repossess? What is going on?"

He added:"What was the bank thinking of to enter unsecured lending into its accounts as real-estate lending? What were the auditors thinking of when they signed the accounts off?

What about financial regulators who are supposed to check the adequacy of banks’ capitalisation - do they allow HSBC to fund these loans with the lower level of capital appropriate to secured (ie real) real-estate lending? What are the guidelines of the Financial Reporting Council for a case like this?"

Given the state of the Hong Kong property market, the unsecured portion of these loans should be written off, Mr Lyddon said.

He continued: "That’s a £3billion hit to go with the £3.3billion hit on the value of Hang Seng Bank: a total hit of £6.3billion instead of the £400 million hit that HSBC has actually taken.”

The shortfall "knocked a hole in the bank's equity", and meant it would have to cut back on business elsewhere, including in the UK, Mr Lyddon said.

He added: "It is four percent of HSBC's equity, which may not sound a lot, but that supports upwards of £120billion of lending, which would have to be eliminated.

"What's more, if their current group-wide practices have permitted the bank to put on so many bad loans in Hong Kong, the bank's entire global loan book needs to be vetted to see if Hong Kong is an outlier, or whether the average quality is lower than it appears."

If , the impact was multiplied: more of the bank’s equity would have to be reserved against the poorer loans, and the amount of other loans which would need to be eliminated would be much more than £120billion, including loans to UK borrowers.

...

Edited November 27, 2023 by jamtomorrow

[sancho panza]

9 hours ago, jamtomorrow said:

Saw this and thought of you @sancho panza - reads very much like a hit piece though, which makes me wonder who commissioned it, and why:

https://www.express.co.uk/finance/city/1838394/financial-contagion-hsbc-china-hong-kong

Financial contagion warning as HSBC is told to brace for ‘catastrophic’ £6.3billion hit

Bob Lyddon fears losses in Hong Kong and China could "blow a hole in the bank's equity".

By CIARAN MCGRATH

08:00, Sat, Nov 25, 2023 | UPDATED: 20:22, Sat, Nov 25, 2023

HSBC is facing a "hit" of more than £6.3billion as a result of unsecured commercial property loans into China, a UK-based tax consultant has warned.

Bob Lyddon branded the situation a ‘disaster’ - and warned of a "financial contagion" risk which could have a knock-on effect on Britain’s economy.

HSBC earlier this month confirmed it was setting aside £910million to cover expected loan losses, including £412million related to the commercial real estate sector in China - but Mr Lyddon said the actual picture was much worse.

The founder of Lyddon Consulting Services outlined his concerns in an analysis specifically written for Express.co.uk - and has urged the bank not to underestimate the seriousness of the situation.

He explained: "HSBC's stake in its Chinese bank - Hang Seng - looks overvalued by £3.3billion given the benchmark set by Standard Chartered.

"Forty-two percent of HSBC's commercial property loans into China are either sub-standard or credit-impaired: £4.6billion out of £11billion. That's a disaster.

"The equivalent figures just for Hong Kong are 63 percent, and £3.8billion out of £6billion. That's a catastrophe."

Even worse, £3billion of this £3.8billion was not backed by real-estate security, Mr Lyddon stressed.

He explained: "That's an oxymoron: they should not be booked as real-estate lending if they are unsecured.

"Are these frauds, where a borrower has used the money meant to construct a building but the site remains vacant?

Or, if there is a building and the borrower has defaulted on the loan, are the bank's mortgage papers defective so it cannot repossess? What is going on?"

He added:"What was the bank thinking of to enter unsecured lending into its accounts as real-estate lending? What were the auditors thinking of when they signed the accounts off?

What about financial regulators who are supposed to check the adequacy of banks’ capitalisation - do they allow HSBC to fund these loans with the lower level of capital appropriate to secured (ie real) real-estate lending? What are the guidelines of the Financial Reporting Council for a case like this?"

Given the state of the Hong Kong property market, the unsecured portion of these loans should be written off, Mr Lyddon said.

He continued: "That’s a £3billion hit to go with the £3.3billion hit on the value of Hang Seng Bank: a total hit of £6.3billion instead of the £400 million hit that HSBC has actually taken.”

The shortfall "knocked a hole in the bank's equity", and meant it would have to cut back on business elsewhere, including in the UK, Mr Lyddon said.

He added: "It is four percent of HSBC's equity, which may not sound a lot, but that supports upwards of £120billion of lending, which would have to be eliminated.

"What's more, if their current group-wide practices have permitted the bank to put on so many bad loans in Hong Kong, the bank's entire global loan book needs to be vetted to see if Hong Kong is an outlier, or whether the average quality is lower than it appears."

If , the impact was multiplied: more of the bank’s equity would have to be reserved against the poorer loans, and the amount of other loans which would need to be eliminated would be much more than £120billion, including loans to UK borrowers.

...

that s a super find JT

It's not only an hoenst assessment of risks ref HSBC,it's also quite a good representation of how losses impact future lending.This is something that a lot of people dont realsie that when losses come,it's not jsut profitrs that suffer but also future lening.

Credit cycles are virtuous circles on the way up and vicious circles on the way down ie as credit gets restrcited,it draws down lending which dras down asset vlaues which by implication,draws down credit availaibitby

[sancho panza]

Must say a very swift bail out.

For me this was the Nrotehrn Rock moment of this crisis in the UK.

 

https://uk.finance.yahoo.com/news/metro-bank-rescue-deal-ahead-143327831.html

The embattled high street lender Metro Bank can proceed with a multimillion-pound rescue deal after receiving approval from its shareholders.

The move comes after the bank announced last month it had negotiated a £925m package, which consisted of £325m of new capital as well as £600m of debt.

As part of the emergency funding deal the bank’s largest shareholder, the Colombian billionaire Jaime Gilinski Bacal’s Spaldy Investments, is taking its stake in the struggling bank from 9% to 53% by contributing £102m of the new capital.

The bank told the London Stock Exchange on Monday that the refinancing proposal had been passed “with very strong support with over 90% of shareholders voting in support of all resolutions”.

The rescue follows a tumultuous autumn for Metro, when its shares plummeted by a quarter on one day in October after it revealed it was considering raising hundreds of millions of pounds from investors. The share price then rebounded by 21% the next day on reports the bank had been sitting on an offer for a £600m capital injection from bondholders.

The lender is also considering selling off up to 40% of its mortgage book to shore up its balance sheet and ensure it can continue to expand. On Monday, Sky News reported that Metro had opened exclusive talks with Barclays about selling £3bn of its mortgages.

Metro was founded in 2010 by the US billionaire Vernon Hill, the first new high street bank to launch in the UK in more than 150 years. It has 2.7 million customers, 76 branches – mostly in the south of England – and holds about £15.5bn-worth of UK customer deposits.

Metro shares were up about 7% on Monday at 41.7p.

Edited November 27, 2023 by sancho panza

[sancho panza]

looking at where the losses might come from...CRE and high st retial looklike interwtined losing trades

 

https://www.telegraph.co.uk/business/2023/12/03/free-cash-machines-will-disappear-atm-link-banks/

Some of Europe’s biggest banks are facing steep losses after lending billions of euros to Austrian billionaire Rene Benko’s property empire.

Analysts at JP Morgan calculate that the two main companies in Mr Benko’s sprawling Signa group have borrowed a combined €7.7bn (£6.6bn) from banks on the continent, with several of his backers lending him hundreds of millions each.

Signa swooped on Selfridges last year in a £4bn deal, teaming up with Thailand’s Central Group. Central sought to tighten its ownership of the prestigious retailer a fortnight ago as Signa’s financial troubles deepened.

It is estimated that €1.8bn of Signa’s debts alone are due to be repaid this year, though hopes of that happening are fading rapidly. Last week, a Vienna court declared the business insolvent as its search for a cash lifeline became increasingly desperate. The company faces an immediate funding requirement of €600m, according to reports.

 

 

JP Morgan estimates that the total financial liabilities of Signa Prime and Signa Development, the two largest entities in the group, stands at €13bn. In addition to €7.7bn of loans, the company owes €1.6bn to bondholders and has €1.8bn of so-called hybrid capital, usually made up of equity and debt, outstanding. A further €2bn is owed to various creditors.

[sancho panza]

jsut storing up problems for the future.in the days of zirp,maybe not si much of an issue but now we're rocking around the 4.5%-5% level,it's a differnet world.

the whole banking system was levered up to the gills during zirp and this time extending terms out beyond 25 years cant cover for the rise in IR.s

Crucially as discussed in the property thread,this effectively turns loans into sub prime imho.The banking system runs into a whole raft of potential issues with mortgagors in terms of health,job security etc etc when extending laons out

We'll have alook back at the year later in the month .We haven't had the banking crisis that I thought would have occurred but we have seen a key marginal player go down-Metro and we can see the structural issues building .

We'll start looking towards the big banks annuals in the new year which will be interesting to see how their stage 2s are progressing.

[Onsamui]

Britons Urged To Prepare For Cyber Attack Or Power Grid Failure | Armstrong Economics

[sancho panza]

via the FT

this is going to get painful.Trend has a long way to run imho

 

https://www.telegraph.co.uk/business/2023/12/12/ftse-100-markets-latest-ons-interest-rates-live/

Interest rate pain 'far from over' as mortgage arrears surge - latest updates

The proportion of mortgage balances in arrears increased to the highest level in six years in the third quarter of this year as analysts warned the pain from high interest rates is “far from over”.

The Bank of England said the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.02pc to 1.14pc - the highest level since the second quarter of 2017.

According to the Mortgage Lenders and Administrators statistics, the value of outstanding mortgage balances with arrears increased by 11.4pc from the previous quarter to £18.8bn. This was 44pc higher than a year earlier.

It comes as households face surging repayments as they remortgage their homes, with interest rates at a 15-year high of 5.25pc.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said arrears “have reared their ugly heads”.

She added: “The pain is far from over. Given the predominance of fixed rates in the market, the squeeze on our finances caused by sharply higher rates isn’t going to come as a short, sharp shock, but as a nasty squeeze on a small section of the mortgage market each month, over a horribly prolonged period of time. 

“With so many people moving from a fixed rate of less than 2pc to around 6pc, it’s no surprise that so many are hitting a brick wall financially.”

[One percent]

29 minutes ago, sancho panza said:

via the FT

this is going to get painful.Trend has a long way to run imho

 

https://www.telegraph.co.uk/business/2023/12/12/ftse-100-markets-latest-ons-interest-rates-live/

Interest rate pain 'far from over' as mortgage arrears surge - latest updates

The proportion of mortgage balances in arrears increased to the highest level in six years in the third quarter of this year as analysts warned the pain from high interest rates is “far from over”.

The Bank of England said the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.02pc to 1.14pc - the highest level since the second quarter of 2017.

According to the Mortgage Lenders and Administrators statistics, the value of outstanding mortgage balances with arrears increased by 11.4pc from the previous quarter to £18.8bn. This was 44pc higher than a year earlier.

It comes as households face surging repayments as they remortgage their homes, with interest rates at a 15-year high of 5.25pc.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said arrears “have reared their ugly heads”.

She added: “The pain is far from over. Given the predominance of fixed rates in the market, the squeeze on our finances caused by sharply higher rates isn’t going to come as a short, sharp shock, but as a nasty squeeze on a small section of the mortgage market each month, over a horribly prolonged period of time. 

“With so many people moving from a fixed rate of less than 2pc to around 6pc, it’s no surprise that so many are hitting a brick wall financially.”

Anyone who thought historically low, emergency interest rates were here to stay and didn’t make contingency plans gets everything they deserve.  

[sancho panza]

1 hour ago, One percent said:

Anyone who thought historically low, emergency interest rates were here to stay and didn’t make contingency plans gets everything they deserve.  

I think zirp and QE 2008 to 2022 lulled a lot of people into a false sense of security.

The owrrying thing is that iirc,the bulk of the laons in stage 2 were of the pre 2012 vintage anmd that we'll liekly see a lot of more recent laons join them as the collateral deterirorates or the borrwoer credit rating does.

I know there were a lot of people,p[articualrly newer arrivals into the market 2019 on who borrowed at their limits.

forma  quick goggle it looks like the bulk of the pain will have been felt by 3.9mn mortgagors by Dec 24

from june 23

https://www.theguardian.com/money/2023/jun/17/uk-homeowners-face-huge-rise-in-payments-when-fixed-rate-mortgages-expire

UK homeowners face huge rise in payments when fixed-rate mortgages expire

This article is more than 5 months old

More than 2.4m deals are ending in 2024, raising fears of financial timebomb

More than a quarter of UK homeowners on a fixed-rate mortgage are heading for sharp increase in monthly payments before the next election, in a financial timebomb that will rock the Conservatives just as voters prepare to choose the next government.

Up to 60% of this mortgage timebomb was yet to hit consumers because millions of households were still on fixed-rate deals struck before the Bank of England started raising interest rates from a record low of 0.1% in December 2021.

Almost all of the financial blow will land before the next election, which must be held by 28 January 2025, with households expected to face as much as £15bn in additional payments in time for Christmas next year.

 

 

https://www.mortgagestrategy.co.uk/news/ons-says-1-4m-households-face-higher-remortgage-rates-in-2023/

More than 1.4 million UK households face the prospect of interest rate rises when they renew their fixed-rate mortgages in 2023, says the Office for National Statistics.  

The majority of fixed-rate offers in the country, or 57% of these types of loans, coming up for renewal in 2023 were fixed at interest rates below 2%, says the government department drawing on Census 2021 data.  

It adds that deals that are due to mature through the course of 2024 will be from two-year fixed-rate offers made in 2022 and five-year fixed-rate deals made in 2019, when mortgage rates were generally higher than 2%.   

 

Edited December 12, 2023 by sancho panza

[Sugarlips]

Just using the latest numbers 10Y gilt rate is sub 4% now so the cheap fixed rate loans will likely be on 4% come the new year rather than 6% , assuming they shop around and have sufficient equity etc. Still higher but less bad than predicted.

Edited December 12, 2023 by Sugarlips

[One percent]

8 minutes ago, sancho panza said:

.

Almost all of the financial blow will land before the next election, which must be held by 28 January 2025, with households expected to face as much as £15bn in additional payments in time for Christmas next year.

This bit alone must be focusing minds. I wonder what they will pull out of the hat to address this. 

[Stuey]

8 minutes ago, One percent said:

This bit alone must be focusing minds. I wonder what they will pull out of the hat to address this. 

Much lower interest rates I suspect. 

Energy prices are continuing to crater. 

[sancho panza]

55 minutes ago, Sugarlips said:

Just using the latest numbers 10Y gilt rate is sub 4% now so the cheap fixed rate loans will likely be on 4% come the new year rather than 6% , assuming they shop around and have sufficient equity etc. Still higher but less bad than predicted.

I think for people swapping equity this is not that big a deal.msot with 50% equity wont have big loans.

53 minutes ago, One percent said:

This bit alone must be focusing minds. I wonder what they will pull out of the hat to address this. 

I thinkw e're already seeing the babnks move people onto 35  yr mortgages.

the problem is that they need to generate 40% of the mrotgage demand from FTBers.

Whether they can manage that feat to a large enough degree to keep the plates spinning is a matter of debate.

My view is that it was easy to steer FTBers into 25yr  5 x salary laons at 2%,I'm not sure 35 yr laons at 5xsalary at 6% is as attractive. especially with inflation in food and fuel ruinning liek they are.

[Democorruptcy]

PRA think Metro don't know enough to be able to model future losses.

Metro Bank has suspended its bid to secure regulatory sign-off on risk models that it previously said would turbocharge profitability.
The UK challenger bank has quietly shelved work on its attempt to persuade the Bank of England to allow Metro to use its own internal calculations to model for risk, according to people familiar with the situation. Some added that the project would probably be abandoned as the possible benefits waned.
Metro’s attempt to use internal models became headline news in October when fears about delays to the initiative triggered a sharp fall in the bank’s share price, which was only stabilised by an urgent £925mn funding deal.
At the time, Metro would not say whether it was continuing with its five-year-old campaign to move to sophisticated models that would cut the capital charges for its mortgages. It currently uses models set by global regulators that are generally viewed to be more expensive for banks as they tend to be required to hold more equity.
Metro would make big gains if the BoE’s Prudential Regulation Authority allowed the lender to follow its larger rivals in using its own models to prove that their mortgage loans were less risky than the “standardised” risks implied by frameworks set by the Basel Committee on Banking Supervision.
But supervisors at the PRA have been sceptical about whether newer banks have enough data to predict losses on their loans, leading watchdogs to order banks to be more conservative if they do not have enough of their own data to build robust models.