Yahoo News is better in the app -- The UK is facing a “double whammy” as higher-for-longer interest rates begin to bite, with the country particularly vulnerable to a pullback in consumer spending and knock on consequences for corporate debt.The Bank of England warned this week that the full impact of elevated borrowing costs has yet to fully pass through, although about two thirds of UK adults have already cut back on discretionary purchases and retail sales are almost flat by volume.
More than $15 billion of UK corporate debt is trading at distressed prices, according to data compiled by Bloomberg News — up nearly 50% since late last month. In addition, there may be some weakness in so-called non-conforming mortgages, which are loans to homeowners who don’t meet the typical mortgage criteria from high-street banks.
Private sector landlords are more vulnerable than their listed counterparts because they took on more leverage and, with prices falling, lenders may demand that they sell assets to recoup their loans. That’s showing in insolvencies, which have been increasing since early 2021, according to data compiled by a government agency, as small businesses default on more loans, a trend that was expected to spread to medium-sized firms in the third quarter.For those companies big enough to do so, raising money in euros and dollars can be more attractive than pounds because policy rates are 125 basis points higher in the UK than in the euro region.
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