Bank of England says UK banks are resilient enough to offer support to struggling households

LONDON (AP) — The Bank of England warned on Wednesday that households across the United Kingdom were facing mounting problems due to the sharp rise in interest rates, but found that the country’s biggest banks were sufficiently resilient to offer more aid than they could before the global financial crisis. crisis 15 years ago..

In its regular health check of the economy, the central bank said British households are facing higher debt due to rising interest rates, especially those whose fixed-rate mortgages have taken end or soon will be.

However, he said several factors should limit the number of people who have to default on their mortgages. He noted, for example, that the country’s banks have more capital than 15 years ago to allow them to offer struggling households more financial options, such as the ability for borrowers to vary the terms of their loans.

The bank raised its main interest rate by half a percentage point to a 15-year high of 5% last month and warned of further hikes if inflation shows no signs of returning towards its 2% target. This had a ripple effect on credit 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 UK Finance. Households will be looking to secure new deals which, as things stand, could be at least a third more expensive

The Bank of England also found that the country’s banks are “resilient” to a scenario involving persistently high inflation, rising global interest rates, deep recessions and rising unemployment.

The bank noted that the sharp rise in interest rates in many countries and greater market volatility over the past 18 months have “created stress in the financial system through a number of channels”, including bankruptcy. of three mid-sized US banks and Credit Suisse.

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