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

LONDON (AP) — The Bank of England warned on Wednesday that UK households are facing mounting difficulties from the sharp rise in interest rates, but found the country’s largest banks are resilient enough to provide more aid than before the crisis. global financial crisis. crisis 15 years ago..

In its regular health check of the economy, the central bank said UK households are facing higher levels of debt due to rising interest rates, particularly those whose fixed-rate mortgages have expired or are about to end.

However, it said there are several factors that should limit the number of people who have to default on their mortgage. For example, it noted that the country’s banks have more capital than they did 15 years ago, so they can offer troubled households more financial options, such as allowing borrowers to change the terms of their loans.

The bank last month raised its key interest rate by half a percentage point to a 15-year high of 5% and warned of further hikes if inflation shows no signs of falling back towards its 2% target. This has had a domino effect on the credit markets, particularly the mortgage market.

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According to figures from industry organization UK Finance, approximately 2.4 million fixed-interest mortgages will expire at the end of 2024. Households will look for new deals that, 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 of continued high inflation, rising global interest rates, deep recessions and higher unemployment.

The bank did note that the sharp rise in interest rates in many countries and increased market volatility over the past 18 months have “stressed the financial system through a number of channels,” including the failure of three medium-sized US banks and credit institutions. Swiss.

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