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Bank of England steps in and warns of threat to Britain’s ‘financial stability’
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Bank of England steps in and warns of threat to Britain’s ‘financial stability’

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High Street Banks have begun to pull home loans amid ongoing financial chaos in the UK.

The Bank of England stepped in to buy long-term government debt amid the continuing financial meltdown sparked by Kwasi Kwarteng’s ‘mini-budget’.

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The Bank said it would step in for ‘temporary and targeted purchases in the gilt market’  due to risks to Britain’s ‘financial stability’.

In a statement, Threadneedle Street said, “Repricing has become more significant in the past day – and it is particularly affecting long-dated UK government debt. 

“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

Pound plunges again

Bond markets recovered in the wake of the announcement, but the Pound fell once again, dropping by around 1.6% in midday trading. 

The highly unusual move came as 30-year bond yields hit a high not seen since 2002 before the Bank’s announcement. 

Banks pull home loans

British high street banks including HSBC and Santander have begun to pull mortgage loan deals, with mortgage rates expected to rise. 

Mortgage brokers described queues of hundreds to access the few banks still offering loans, according to the Financial Times

Kwarteng’s £200 billion package of tax cuts included abolishing a planned rise in corporation tax on businesses to 25% from its current level of 19%. 

Income tax will also be cut by 1p to 19p from next April – and the 45p rate of income tax for top earners will be abolished from April 2023. 

Stamp duty on home purchases is also being slashed, with the level at which house-buyers begin to pay the tax doubled from £125,000 to £250,000.

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