- In a bid to control rampant inflation, the central bank raised its main interest rate from 0.1% in December 2021 to its highest level in 15 years of 5.25% currently.
- And the market expects another increase later this week, to 5.5%.
In August, the Bank of England raised interest rates for the 14th time in a row.
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Britain’s banking sector is seeing an increase in writedowns amid rising inflation and related interest rate hikes, according to Bank of England Deputy Governor Sam Woods.
In a bid to bring rampant inflation under control, the central bank raised its main interest rate from 0.1% in December 2021 to its 15-year high of 5.25% currently, and the market expects to another increase later this week to 5.5%.
The economy has proven surprisingly resilient, but Woods, also CEO of the Prudential Regulatory Authority, said regulators were closely monitoring potential strains in the banking sector.
“So far things have gone a little better than many people expected and, particularly thanks to Covid, of course the enormous fiscal and monetary support has actually protected the banking system from credit losses,” Woods told CNBC on Tuesday.
“But right now we’re seeing an increase in write-downs in the banking sector. It’s not a situation that should worry people.”
The PRA estimates that just over 1% of mortgages are in arrears. Woods noted that this figure was just as high in 2018, and during the financial crisis it was 3.6%.
“The number is increasing, but from a very low level, and we are monitoring it closely,” he added.
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