By David Milliken and Huw Jones
LONDON (Reuters) – The UK economy has proven resilient to interest rate spikes over the past year and a half, but it will take time Bank of England Wednesday Said, in order to give full play to the influence.
The Bank of England raised interest rates to 5% last month, compared with 0.1% at the end of the triggering concerns over the impact on households, businesses and the wider financial sector Fears of a shock that could tip the economy into recession.
But in a semi-annual review of the economy’s health, Bank of England Governor Andrew Bailey told a news conference that “the UK economy and financial system have so far been resilient to interest rate risk”.
“We will continue to monitor credit conditions for any signs of tightening that cannot be satisfactorily explained by changes in the macroeconomic outlook.”
High debt The proportion of households is rising, but even taking into account the higher cost of living – inflation was 8.9% in May – it may still be lower than 800.
Average rates on new two-year fixed-rate mortgages, the most common form of home financing, rose to their highest point since last September’s mini-budget on Tuesday reached an annual high of 6.000%, according to data provider Moneyfacts.
UK Financial Sector Estimates 285, Households will need to refinance half of 2024 more expensive mortgages and another 1.6 million of 2024 in the second quarter.
The typical mortgage holder will pay an extra 66 per month when they refinance later this year, the bank says ($66), nearly 1 million households will pay at least more 220 GBP.
said UK banks were less at risk of being adversely affected by higher interest rates than households, especially compared with financial institutions in other countries, while the corporate sector remained “generally resilient”.
“Nevertheless, the cost of raising financing volumes may weigh on some smaller or highly leveraged firms,” it added.
The Bank of England sees particular risks in corporate borrowing in the global commercial real estate and private credit and leveraged loan markets.
Eight of the UK’s largest banks are well capitalized to handle higher interest rates, the Bank of England announced after its annual “stress test” of the sector:
“The UK’s major banks’ capital and liquidity positions remain strong and profitability has improved, allowing them to improve their capital positions and support customers.”
The BoE’s Financial Policy Committee retained the banks’ The countercyclical capital buffer, a tool used to manage risk and lending during the credit cycle, was left unchanged at 2%.
The Bank added that following the collapse of Silicon Valley Bank, the Bank is working with the Treasury Department to ensure that there are options for a smooth closure of small banks. Some larger sizes on request.