As living costs continue to rocket and interest rates soar, many consumers across the UK are struggling financially. However, as households continue trying to cope with overstretched budgets, one of the UK’s leading banks, HSBC, has been raking in huge profits.
According to recently released figures, the High Street bank has seen profits soar by a billion as consumers continue to battle financial problems. HSBC has seen its net interest margin increase from 1.19% a year ago to 1.57% in the third quarter of this year. The bank has profited hugely from soaring interest rates, but claims mortgages are still affordable.
In monetary terms, HSBC has seen its profits rocket from £4.87 billion a year ago to £5.76 billion. The spate of interest rate increases over the past ten months has enabled the bank – along with other banking giants – to boost profits significantly but has left households and borrowers facing increasing money worries.
Customers think higher rates are affordable
In addition to revealing its third-quarter figures, the bank claims that most of its customers think its higher mortgage rates are still affordable.
According to the current chief financial officer and executive director, Ewen Stevenson, any customers that do need help will receive support from the bank.
Stevenson, due to leave the group next April, said: “Based on what we can see at the moment, for the great majority of our customers we think the higher rates are affordable. For those customers who need help, we will do whatever we can to support them.”
He also said that the bank was already stress-testing the ability of borrowers to keep up with mortgage repayments up to rates of 7% and that they were still ‘comfortably within that test’.
Issues may arise if borrowers start to default
The series of rate hikes since last December has undoubtedly been great for the bank’s profits, leading to a considerable boost over the past year. However, officials have said that it could also lead to problems in the future if a rising number of borrowers default on their loans.
At present, mortgage holders with variable-rate loans are dealing with significantly higher repayments because of the rate increases. In addition, they have other rising costs to cope with, including food, petrol, and energy costs, among others. All of this has taken its toll on household finances and could lead to a rise in the number of people who can no longer meet their mortgage repayments.
Despite this, bankers from HSBC claim that loan losses for the year so far have remained stable even though households are under increased financial pressure.