Karim Haji, EMA and UK Head of Financial Services at KPMG, said:
“Banks may be continuing to benefit from a high interest rate environment as margins normalise after a long period of ‘low and slow’ conditions, but they recognise this is temporary and are looking to increase fee-based earnings to reduce sensitivity to interest rates.
“To date there hasn’t been a significant increase in credit losses through impairments, and with defaults on the up, pressures on banks will only intensify if the base rate continues to rise. It remains to be seen if margins are sustainable at these high levels after credit cost, especially given the reasonable increasing political and regulatory focus on higher rates being passed through to savers.
“Banks are considering how best to respond given their ethical and moral responsibility to customers struggling financially and they will be thinking about sustainable solutions, not just short-term relief. Rate rises are a complex issue and mortgage lenders need to more focus on affordability when extending products, and will want to ensure that customers fully understand what could happen in various interest rate scenarios.”
