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LONDON, July 7 (Reuters) -
OneSavings Bank shares plunged 20% on Friday to their lowest in nine months after the company said it would take a hit of up to 180 million pounds ($229.14 million) because customers were refinancing their mortgages more quickly than forecast.
The British lender said it had observed a "step change" in the behaviour of certain mortgage customers who had moved quickly to refinance their mortgages after their initial fixed term had expired.
As a result these customers spent less time than expected on the higher "reversion" rate, pegged to Britain's benchmark bank rate.
The resulting "adverse underlying effective interest rate adjustment" would result in a hit of 160-180 million pounds, the company said in a trading update after market close on Thursday.
The Bank of England last month raised its main interest rate 5%, its highest since 2008. Market pricing currently reflects expectations this rate will reach
as high as 6.5%
early in 2024, which would mark a 25-year peak.
"OSB's underwriting looks less good in this light than before," said analysts at Jefferies in a note, though they said that they did not see this affecting other parts of the company's business.
Britain's FTSE 250 banks index was little changed, though shares of smaller lenders dropped.
Virgin Money's and Paragon Banking Group both fell around 2.3%.
