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Shares in UK lender OSB Group fell by more than 20 per cent on Friday after the company warned that its profits would be hurt by mortgage customers scrambling to mitigate against rising interest rates.
Mortgage holders coming off fixed-term deals often spend a period of time on a variable rate, also known as a reversion rate, before moving on to a new deal. Reversion rates are linked to the Bank of England’s base rate and have been rising quickly.
OSB said customers of its Precise Mortgages brand were choosing to spend less time on the rate than before, suggesting they were racing to secure new fixed deals in anticipation of higher interest rates.
“The group anticipates that Precise Mortgages customers will now spend an average of five months on the reversion rate,” said the company in a statement after the stock market closed on Thursday.
The result, said OSB, would be a £160mn-180mn hit to profits for the first half of this year. The company said excluding that hit, its net interest margin for the period would be slightly ahead of expectations, while administrative costs would be slightly lower.
Prior to the profit warning, analysts had been expecting the company to report pre-tax profits of about £548mn this year, according to Refinitiv.
Precise Mortgages targets customers that can struggle to borrow elsewhere, such as the self-employed or people with poor credit histories.
Shares in OBS were down 24 per cent at 358p in early trading on Friday.
