The Barclays chief said UK mortgage holders would see their monthly payments jump to as much as 30% of their income from around 20% over the past few decades.
CS Venkatakrishnan, better known as Venkat, said that the sharp rise in interest rates will lead to a “huge income shock” by the end of next year.
“By our assumptions, for the average household with an average mortgage, what they’ve paid in mortgages or rent payments in the last two decades — the ’90s through 2020 — is about 20 percent,” he said during an interview at the Wall Street Journal’s CEO Council Summit. from their income.
This would be around 28 percent to 30 percent of their income. So there is a huge income shock.
“Obviously it affects consumption, and this is before you bring in the other effects of inflation which are food, energy, basic goods and services.
“I think therefore what you will eventually see is a slowdown in consumption – we are already seeing it.”
Barclays Group CEO Venkat said the recent banking turmoil could lead to less lending and more mergers between banks.
He said, “I think the initial discovery phase is over, and I think there will be discovery and modification in the long term.
“The three banks that failed—Signature Bank, Silicon Valley Bank, and First Republic—were most visible when people started looking at asset pricing plans.”
But he said many other banks with smaller asset problems could start looking to sell portfolios and “heal themselves”.
“What that would probably mean is less lending,” he said.
Asked if the recent US bank failure could be an opportunity for big banks to grow bigger, Venkat said: “I think you will see more banks interested in some kind of merger.”