- In an attempt to tame runaway inflation, the central bank raised its key interest rate from 0.1% in December 2021 to a 15-year high of 5.25% currently.
- The market expects another rise later this week to 5.5%.
In August, the Bank of England raised interest rates for the 14th time in a row.
Alexander Spatari | moment | Getty Images
The British banking sector is seeing a rise in deficit provisions amid rising inflation and a subsequent rise in interest rates, according to Bank of England Deputy Governor Sam Woods.
In an attempt to tame runaway inflation, the central bank raised its key interest rate from 0.1% in December 2021 to a 15-year high of 5.25% currently, with the market anticipating another hike later this week to 5.5%.
The economy has proven surprisingly resilient, but Woods, who is also chief executive of the Prudential Regulation Authority, said regulators were closely monitoring potential pressures in the banking sector.
“So far things have gone a little better than a lot of people expected, and especially during Covid of course, the massive fiscal and monetary support has actually protected the banking system from credit losses,” Woods told CNBC on Tuesday.
“As we look at it now, we’re actually seeing deficits in the banking sector rise. It’s not something people should be worried about.”
The PRA estimates that just over 1% of mortgages are delinquent. Woods noted that this number was equally high until 2018, and during the financial crisis it was 3.6%.
He added: “So it is rising, but from a very low base, and we are monitoring it closely.”
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