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Big British banks pull mortgages: Pound tanks further while dollar soars

Big British banks pull mortgages: Pound tanks further while dollar soars

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Perhaps the biggest anomaly this year remains why the US dollar has held such strong value against other major currencies, as the US economy has been hit by similar headwinds that have affected its counterparts in the UK and continental Europe.

At the start of this week, the British pound plunged to a record low against the US dollar as investors rushed to sell the currency and government bonds, showing skepticism about the economic plans of new Prime Minister Liz Truss, but the low performance has since continued. confidence has emerged.

Yesterday, 10 of the UK’s major retail banks pulled a number of mortgage products from the market and significantly modified the terms of some of the mortgage products on the market to manage potential risks if interest rates rise by 5-6% expected in January.

If such an interest rate were to be reached, it would substantially increase payments on personal and business debts, as the interest rate is currently around 2.6%.

That, combined with a strong pound and inflation of 18% in January, according to analysts at Citigroup last month, is a combination of equations that does not make for a healthy borrowing environment.

The withdrawal of these mortgage products has started to affect property markets outside of London, with consumer activity, including home buying, likely to decrease, further slowing the economy.

The FTSE 100 responded accordingly yesterday with shares in housebuilders losing value, while raw materials suppliers and mineral extraction giants rose.

It certainly looks like the commodity and materials sector is buoyant due to high demand, but anything that requires a loan to buy an end product is now falling in value.

The pound is now almost on par with the US dollar, evidenced earlier today during the Asian trading session, when the British pound hit a low of $1.0327 against the US dollar, surpassing the previous record low reached in 1985 before regaining some of its value.

Uncertain is an understatement. With banks de-risking so massively, it looks like the roller coaster ride isn’t over yet.

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