- Approximately 1.2 million residential mortgages in Great Britain are adjustable rate mortgages (ARMs).
- As the Bank of England (BOE), continues to move interest rates higher (3% rate today and likely moving to 3.5% on December 15th), the average ARM holder will have to absorb significantly higher monthly payments which translates to commensurately less disposable income. This will serve not only as a wet blanket on the British economy, but will dampen demand for imports from the U.S. and other countries. Consensus is that the BOE will have interest rates peak in Q1 2023 at 4.25% (see chart below for historical BOE policy rates).
- Who knows how long the BOE will perists with “elevated” rates as the Bank is a more dovish Central Bank than is our Federal Reserve.
- Mounting job losses will only exacerbate the problem HERE.
- U.K. mortgage rates are approximately 5.5%.
- U.K. consumer prices are up 10-11% depending on the measure HERE.
Bank of England historical policy rate (currently sits at 3%):
Interesting article by the Resolution Foundation HERE.