Lloyds Banking Group (LSE: LLOY) was the most traded stock by volume FTSE 100 Tuesday morning. Lloyds shares fell 0.5% until mid-morning, but the balance of business seemed pretty good. That’s right with the index, among the indications of an early interest rate hike. Hmmm. I wonder what exactly Lloyds shareholders might need?
The Bank of England kept interest rates low at 0.1% during the epidemic. But inflation is rising rapidly, and accordingly The Telegraph, Monetary Policy Committee member Michael Saunders made a statementSignificantly earlier“Interest rates rise.
Many analysts now expect the rate to rise by February 2022. And some say we’ll see it before the end of 2021. What does this mean for Lloyds and other UK banks? Lloyds is in the business of making money with nding. And low interest rates don’t really help. It is not that the epidemic is solely responsible. No, since the financial crisis, and then after Brexit, the UK economy has been growing taller.
Under two years
Low interest rates have been going on for years. And as we shareholders know very well, Lloyds share prices are stuck with them. Okay, Lloyds shares have risen 75% in the last 12 months, but that’s a bit of a recovery after the lockdown. For two years, we are still looking at a 20% drop. BarclaysMeanwhile, it has gained 22% in the same two years. Some of these weaknesses will certainly depend on the UK focus on Lloyds’ internal appearance.
There is another aspect of rising interest rates and their potential impact on Lloyds. It is the largest mortgage lender in the UK, and the increased interest rates are not exactly what home buyers want. So can we go to the weaker mortgage market next year or so?
The bank has a build-to-let business campaign in partnership with us Barrett Developments. If the mortgage market weakens in 2022, could the rental market be stronger to compensate? In reality, Lloyds ’new construction initiatives are relatively small. But I like it as a way to expand the bank’s exposure to different aspects of the property market.
Lloyds share price future?
I am overwhelmed with long-term housing. Some bank investors may be embarrassed by Lloyds because, well, rented building banks don’t, do they? And I hope it will hold the price of Lloyds shares. But I’m happy with the move, and I think it could help my Lloyds dividend lose inflation in the years to come.
Whether or not there is any difference in Lloyds ’shares in the year following the interest rate hike will help us get closer to long-term normalcy. I would like to see inflation stabilize at around 1.8% per year, and interest rates stabilize as a target. And this, I think, will provide the best environment for Lloyds shareholders to prosper.
We certainly won’t go there fast. And I suspect we’ll see another year of ups and downs for Lloyds shares. But I hold on.
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Allen Oscroft owns shares in Lloyds Banking Group. Motley Full UK has recommended Barclays and Lloyds Banking Group. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.