Comment of BoE Financial Stability Report - Richard Pike of Phoebus "double sting in the tail".

28 June 2024

Richard Pike, chief sales and marketing officer at Phoebus, said:

The Bank of England’s Financial Stability Report appears to be very good news for the UK economy. The Financial Policy Committee has found risks to the UK financial system to be mostly unchanged since Q1. Households and businesses have remained resilient to the new normal of higher interest rates, and the Committee considers the UK banking system sturdy enough to support households and businesses, even if the economy slides unexpectedly.

However, the assessment comes with a double sting in the tail which could stall rejuvenation in the property market.

Geopolitical threats remain high. Middle East issues, Russia’s ongoing war in Ukraine and tension between the US and China all risk financial stability in the UK.

There is also concern around the continuing rise of asset prices including credit markets, and the accompanying risk of a sharp correction. This could make borrowing more difficult and expensive for UK households and businesses, creating further challenges for the housing market if interest rates remain higher for longer than expected.

Many households continue to feel the pain of higher living costs and interest rates, and this could especially stifle renters still holding their breath to get on the property ladder as first-time buyers.