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Banks exposed as mortgage competition hots up

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Britain’s banks could be hit by mortgage rates moving even lower as fierce competition in the sector continues, Morgan Stanley analysts have suggested. Alvaro Serrano, an analyst at the Wall Street bank, said: “excess liquidity and low rates have reduced funding cost differentials, leading to more widespread competition.” This latest warning comes a month after Goldman Sachs said that Lloyds was the most exposed to a drop in prices, cutting the bank to “sell” as it, too, cautioned that competition was likely to cause mortgage prices to fall further. Mr Serrano agreed that “there are no signs of competition abating for now”, but he was more bullish on Lloyds, Britain’s biggest mortgage lender. Morgan Stanley has the shares as “overweight” – the equivalent to a “buy”. With 20% of the mortgage market, the analysts think that Lloyds is in a better position than rivals such as NatWest, HSBC and Barclays.

 

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