The central bank of sterling volatility

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A sharp rise in short-term rates could quickly make floating-rate mortgage payments unaffordable for many UK borrowers

It could be the Achilles heel of the UK economy: the increasing leverage of British mortgage borrowers to short-term interest rates. With rates and unemployment at low levels in recent years, total UK mortgage borrowing has increased to £774 billion, fuelling a bubble in house prices and supporting a debt-fuelled consumer boom.

However, a sharp rise in short-term rates – perhaps caused by a geopolitical inflationary shock – could quickly make floating-rate mortgage payments unaffordable for many

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