Metro Bank has reportedly begun talks about the sale of a £3billion chunk of its mortgage book, as the bank attempts to shore up cash.
Advisers to the bank have this week contacted a number of potential buyers of the assets, according to Sky News.
Metro Bank is reportedly looking to raise around £600million in capital to help it refinance debts.
Vicky Pryce, Chief Economist at the Centre for Economic and Business Research, explained the impact of 14 consecutive hikes to the Bank of England base rate within less than two years is being seen among borrowers with high mortgages.
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Speaking to GB News presenters Mark Longhurst and Pip Tomson, on The Live Desk, she said: “We need to be a little bit worried about the way in which interest rates have been raised. They’ve been raised fast over quite a short period of time, at rates we haven’t seen in decades.
“That is causing a number of problems, particularly for households with high mortgages.
“One of the interesting things about Metro is that it has indeed been quite involved in the mortgage market and it is trying to sell a bit of its mortgage book.
“A lot of its mortgages, about 40 per cent, are interest only, and you can see of course the impact that that is having on people being able to meet the requirements that they have.
“They had been going to the regulators… and asking whether they could amend or reduce the capital requirements that they have imposed on them on their mortgage book.
“That would of course have helped them and wouldn’t have perhaps created this crisis that we’ve just seen in the last few days, but the regulator said, ‘No, not until 2024.’
“That is, I think, what led to the latest concerns about Metro, and them going out and saying we need to do something about our capital base.”
Metro Bank has said it is looking at a range of options including a combination of equity and debt, as well as possible asset sales, however, it stressed “no decision has been made on whether to proceed with any of these options”.
Metro Bank has reported underlying profitability for the past three quarters, and told investors it “continues to be well positioned for future growth”.
The bank is due to refinance around £350million of debt by October 2025.
GB News presenter Pip Tomson asked how worried customers should be, wondering if they were “well protected”.
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Senior Economist Vicky Pryce spoke about the Metro Bank news on GB News
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Ms Pryce replied: “The interesting thing with Metro is it has, probably, a customer base which will not be affected mostly, because there is the £85,000 [FSCS] protection.”
She said customers with up to £85,000 in savings “will be fine” as they are able to claim compensation from the FSCS if a UK-regulated bank were to fail.
Ms Pryce explained that “wealthier customers” have also been drawn to the bank, however.
She said: ”They offer safe deposit safes in their branches so people can actually put their money in there which other banks don’t do very much any longer, so what you’ve got therefore is a bit of a mix.
“There is a concern and we’ve seen that in what happened in shares, that it indeed may not be able to raise some of the money that it needs very quickly and what we saw was a sell-off that happened yesterday.”
GB News has contacted Metro Bank asking for comment.
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