Bank and housebuilding shares tumbled yesterday as investors worried about the state of the mortgage market.
Banks face pressure on their mortgage loan books as customers roll off fixed-rate deals and on to higher rates, at a time when costs elsewhere are also rising.
Analysts said the share price falls reflected the market’s expectation of deteriorating credit quality at UK banks as rates rise, even though 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 can have a devastating impact on borrowers who are already struggling to cover their monthly essentials and could well lead to a rise of ‘mortgage prisoners’, the analysts warned.
Squeezed: Banks face pressure on their mortgage loan books as customers roll off fixed-rate deals and on to higher rates, at a time when costs elsewhere are also rising
Other investors believe the share price move was a reaction to comments from Shadow Chancellor Rachel Reeves, who said the Government should force banks to help struggling homeowners with their loan repayments.
David Cumming, head of UK equities at Newton Investment Management, said: ‘Populist anti-bank rhetoric over the longer-term doesn’t help consumers or the economy.’
Barclays fell 3 per cent, Lloyds slid 1.9 per cent, NatWest lost 1.7 per cent and HSBC shed 1.8 per cent.
Housebuilders also fell as interest rate hikes will drive up the cost to remortgage for the 800,000 homeowners who need to secure a new deal this year, and will also put off buyers.
Persimmon fell 2.7 per cent, Barratt dived by 1.7 per cent, Vistry plunged 3.2 per cent and Taylor Wimpey slid 1.7 per cent.
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