Treasury Market Commentary –

UK mortgages hit highest level for 15 years

A weekly economic update from our Treasury team.

Published

14th July 2023

Category

Macro Commentary

This week mortgage costs hit the highest level for 15 years, with two-year levels now currently at 6.66%. Mortgage rates have been rising sharply over recent weeks, with the possibility of more increases to come. Market data on wages and rising prices means markets anticipate that inflation and interest rates will stay higher for longer in the UK than previously expected.

UK wages also rose at record annual pace, regular pay grew by 7.3% for the May period from a year earlier, official figures showed, equalling the highest growth rate last month. Despite the record increase, pay rises still lag behind inflation, whilst job vacancies fell for the 12th consecutive time. Analysts predict the Bank of England may push rates to 5.25% at its next meeting in August, however an increase to 5.5% isn’t completely ruled out.

The US inflation rate slowed to 3%, the lowest rate in more than two years. There are increasing signs that inflationary pressure is easing, however the Federal Reserve remains likely to raise rates by 0.25% later this month, which many are hoping this could be the last, but policymakers insist there could be further increases to come.  

In Europe the main outlook continues to be on inflation, focus remains on the next European Central Bank meeting, with markets pricing another 0.25% rate hike this month.    

On the exchanges, Sterling has rallied this week on the back of US data, hitting yearly highs of 1.3100, whilst GBP/EUR key levels to watch are 1.1500 – 1.1750.

GBP/USD – 1-year chart

Graph GBP Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

17/7/23

UK Rightmove House Prices YoY

1.1%

n/a

19/7/23

UK CPI YoY

8.7%

8.3%

19/7/23

UK RPI YoY

11.3%

n/a

19/7/23

EU CPI YoY

6.1%

5.5%

21/7/23

GfK Consumer Confidence

-24

n/a

21/7/23

UK Retail Sales YoY

-2.1%

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.3105

USD/JPY

138.15

GBP/EUR

1.1685

AUD/USD

0.6875

EUR/USD

1.1215

USD/CHF

0.8590

GBP/AED

4.8180

XAU/USD

1956

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7442

-0.12%

S&P

4510

+14.50%

EUROSTOXX

4394

+15.83%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+5.86%

5-year

+5.02%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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