MNI: BOE FPC Geopolitical Risks High, Credit Conditions Easier
The Bank of England's Financial Policy Committee said that stability risks were broadly unchanged since June, despite the spike in volatility in global markets in August, and there were signs of easing in credit conditions.
The record of the FPC's September 19 meeting showed that the committee remained concerned about elevated geopolitical risks and historically high debt levels but that actual credit conditions facing UK households and firms had improved.
The BOE's H2 survey of market participants found the top risk cited by respondents was the geopolitical one, with 93% listing it in their top 5 risks, up from 85% in H1, with the FPC warning of risks stemming from large leveraged positions.
A deterioration in the perception of the long-term path of public debt could interact with market vulnerabilities, particularly from leveraged trading strategies and "lead to a tightening in credit conditions for households and businesses," the record said.
Recently, however, credit conditions have eased with the Bank cutting the policy rate in August. On the Bank's latest figures around a third of mortgagors who were paying fixed rates of 3% or less have yet to refinance but the higher rates they will face will be lower than previously assumed.
For 1.4 million mortgagors refinancing in the next 12 months the average increase in debt repayments is, on the Bank's figures, going to be GBP150 higher per month compared to the previous GBP180 estimate.
The FPC left the countercyclical capital buffer (CCyB) unchanged at 2%, its neutral rate, and said that UK banks had proven resilient and able to keep lending going to support economic activity. The FPC stood ready to move the CCyB in either direction as events unfolded.