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Bank of England Financial Stability Report December 2023

ended 06. December 2023

The Bank of England has just published its Financial Stability Report (December 2023). You can read it >> here <<. It's quite detailed so you won't be able to cover everything in it but any thoughts on any specific areas of it, send them across. Deadline is tight.

7 responses from the Newspage community

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Carla Hoppe
Founder and CEO at Wealthbrite
Inflation has been halved but remains stubbornly high. Household finances are continuing to be put under a huge amount of pressure and a neat summary of this report might be: things aren't quite as bad as they have been but still aren't as good as they could be. The cost of living has become a perma-crisis for many. Some of the more concerning details in the report are that the proportion of take-home pay being spent on household costs will continue to rise in 2024 and with more people opting for longer-term mortgages the impact on their long-term financial stability may reverberate for decades to come.
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Graham Cox
Director at Bridging Hub
The Bank of England's report paints a surprisingly benign picture of household incomes higher than anticipated, businesses largely adjusting well to a high-interest rate environment and limited use of the Mortgage Charter by homeowners. Yet it's hard to feel reassured when the central bank's record of predictions has been so appalling in recent years. So bad in fact, that they've called in Ben Bernanke, former head of the Federal Reserve, to improve their forecasting models.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Around five million mortgage holders (55%) have already taken the brunt of higher mortgage rates, leaving 45% of mortgage holders on pre-December 2021 rates and they have not felt the full effect of arguably the biggest shift in the cost of living in a generation. Whilst arrears remain low, they are rising as people struggle with basic costs of living and home ownership. Businesses, particularly small or those that are heavily indebted are also being hardest hit. The cost of their debt may become unmanageable, and coupled with increases in minimum wages, may tip even more over the edge.
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Ken James
Director at Contractor Mortgage Services
The report doesn't make for light reading. The tacit message within this report is that we are far from being out of the woods, and that there is a long way to go yet. Households and businesses remain under pressure from higher interest rates and the cost of living, and the macroeconomic outlook remains subdued. Approximately 55% of mortgage accounts have repriced since rates started to rise and around 5 million more households are going to be affected by 2026. As a broker, we are seeing this affecting our clients not just financially but emotionally. We hope that mortgage rates will continue to come down to reduce the impact of rate shock, and that homeowners can start to get some sense that things will improve.
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Justin Moy
Managing Director at EHF Mortgages
It's good to see the Bank of England acknowledge that the base rate has taken a 'lower path' than expected. When coupled with wage inflation, this has meant the very worst has been avoided, but we have still seen significant increases in payments for over 5m borrowers so far, with a similar number still to feel that between now and 2026. The 'Higher for Longer' mantra for the base rate still rings loud and difficult times lie ahead for both mortgage borrowers and businesses. Home purchases are down by a quarter over the past 12 months, and the first-time buyer market is still sluggish. Arrears will worsen in 2024, but this only represents about 1% of all mortgages so the effect has been minimal so far. I don't think there are any surprises in the report, but some small improvements give us some hope for 2024
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Chris Steele
Founder at myTribe Insurance
As a small business that has employees and works with a range of freelancers, we've experienced a significant increase in expenses in the past 12 months, and with inflation still well above target and the full impact of interest rate changes yet to come, we expect the trend to continue throughout 2024. It's important to us that we look after those that work for us and with us and, therefore, wages and fees paid to external freelancers will likely have to rise further. The impact of this on our business is that we have less to invest in new incentives and growth as we're paying more for the things we're already engaged with.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
Mortgage payments are up for families, the cost of living is up for families, but savings, worryingly, are down for families. Although mortgage rates have been creeping down in recent months, those who are coming off ultra-low fixed rates are still seeing a huge increase in their monthly payments. Now is the time, if you have not looked at financial planning before, to start, to ensure you are on top of everything now and that your finances will be in the best possible shape in the future.