Barclays hit as families overpay on mortgages

Barclays shares fell yesterday despite higher half-year earnings as it warned of lower earnings as customers respond to higher mortgage rates.

It posted a £4.6bn profit in the first half of the year, up 22 per cent from the same period a year earlier.

The shares fell 5.3 percent, or 8.66 pence, to 155.4 pence. Barclays, like other banks, has benefited from rising interest rates, profiting from the difference between the rates it charges borrowers and those it pays to savers, called the net interest margin.

Its net interest margin rose sharply from 2.67 percent in the first half of last year to 3.2 percent this year, and is now expected to drop to 3.15 percent for the second half.

This is because many customers who face rising mortgage bills when they switch to more expensive offers choose to overpay to lower those bills.

Chief Financial Officer Anna Cross said “the facts have changed” since the previous profit margin guidance was issued: Base rates are 5 percent, inflation is stubbornly higher and mortgage rates are higher.

Barclays also set aside £896m against the risk of loans going sour. Cross said there “wasn’t a huge amount of growth” in the mortgage market, but it was “extremely active” as borrowers rushed to remortgage.

Earnings at Barclays investment bank fell 10 percent amid a continued slump in global trading.

Smaller rival TSB also reported rising profits, up 44% to £147.9m, amid higher rates while also revealing lower demand for loans.