By Jack Barnett
London’s FTSE 100 was yanked higher today by Britain’s biggest banks surging after being given a clean bill of health by the Bank of England this morning.
The capital’s premier index notched one of its best days in weeks, surging 1.83 per cent to 7,416.10 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, soared 2.42 per cent higher to 18,579.54 points.
All of the UK’s largest banks were judged by the Bank in its bi-annual stress test, released today, to be able to withstand the recent surge in interest rates and an economic slump.
“UK banks would be resilient to a severe stress scenario that incorporated persistently higher advanced-economy inflation, increasing global interest rates, deep and simultaneous recessions in the UK and global economies,” the Bank said.
Lenders included in the test surged on the FTSE 100. NatWest skyrocketed 3.57 per cent. Barclays followed close behind, up 3.3 per cent, as did Lloyds Bank, up 2.66 per cent.
House builders were also in the green today, likely due to the Bank’s upbeat assessment allaying concerns about banks retreating from the housing market to protect their balance sheets from riskier borrowers. Persimmon jumped more than four per cent.
There has been mounting concern about homeowners struggling to repay their home loans once they switch on to a new contract with a much higher rate. Data from Moneyfacts yesterday revealed the average rate on 2-year fixed mortgages hit its highest level in 15 years, up to 6.66 per cent.
Average home loan borrowers are poised to be losing the greatest share of their monthly income to mortgage repayments since 2007, experts have said. The Bank estimated nearly 1m homeowners could see their monthly mortgage payments climb at least £500 by 2026.
Soft data from the US that showed inflation is falling faster than expected, down to three per cent, supported the FTSE 100’s rise today by allaying bets on more Federal Reserve interest rate rises. The Bank is expected to raise borrowing costs above the Fed’s peak.
Pound sterling surged on the news, up 0.4 per cent against the US dollar. The currency is up more than six per cent against the greenback so far this year.
