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Daily News Roundup: Friday, 30th September 2022

Posted: 30th September 2022


Banks overlook savers but increase mortgage costs

While savers are seeing little to no benefit from rising interest rates, banks are passing on higher costs to homeowners. With analysts forecasting that the Bank Rate will rise to 5.75% next year, lenders have reacted by pulling a number of mortgage deals and increasing rates on the loans that are still available. Moneyfacts analysis shows that while banks have only increased the average rate for easy-access cash Isas by 0.02 percentage points since Friday, the average two-year fixed-rate mortgage has risen from 4.74% to 4.87%, a 0.13 percentage points rise. Savers in standard accounts have seen the average rate rise from 0.91% to 0.95% since Friday, a 0.04 percentage point rise. Laura Suter of broker AJ Bell said high street banks are failing to protect their customers from the impact of inflation, while leaving them exposed to higher mortgage costs. “The big banks simply do not have the incentive to help because they do not need extra business. Most people will not move their savings accounts,” she said.

HSBC may quit Canary Wharf HQ

HSBC is considering leaving its landmark Canary Wharf headquarters in London, with the bank reviewing whether to keep the tower after last year vowing to slash around 8.6m sq ft of office space worldwide. The bank said it had decided to review "the best future location in London" before the 2027 expiry of the lease on its 45-floor tower at 8 Canada Square. In a memo to staff, HSBC's operating chief John Hinshaw said the lender is weighing up whether to extend the lease of its headquarters, with renovating the building another option. He added that HSBC’s global base will remain in London. The building is owned by Qatar’s sovereign wealth fund, the Qatar Investment Authority, which bought it for £1.1bn in 2014. 


Bank of Ireland sees record fine for mortgage overcharging

Bank of Ireland has been fined a record €100.5m by the country's central bank for overcharging customers denied mortgages that track base rates. This means a total of €279m in fines has been handed to banks over the failure to offer a mortgage that tracked the European Central Bank rate that had been at or close to zero for almost a decade. AIB and its EBS subsidiary were fined €96.7m in June under the probe which was launched in 2015. NatWest's Irish unit, Ulster Bank, was fined €37.8m over the issue, with local lender Permanent TSB and Belgian financial group KBC fined €21m and €18.3m respectively. Irish banks have also paid out around €730m to compensate some 40,000 borrowers. 

Barclays to pay $361m over securities error

Barclays has agreed to pay $361m after control failures led the bank to sell $17.7bn of securities it was not allowed to issue. Barclays disclosed in March that it had accidentally oversold complex structured and exchange-traded notes, exceeding by about 75% a $20.8bn limit on such sales it had agreed with the US Securities and Exchange Commission (SEC). The SEC found that the bank failed to implement any internal controls to track such transactions in real time.

JP Morgan’s Bossart moves to Rothschild

US investment bank JPMorgan's head of Switzerland, Nick Bossart, is moving to Rothschild & Co to lead its Swiss advisory business for mergers and capital market transactions. Mr Bossart, whose career includes stints at Deutsche Bank and UBS, will be replaced at JPMorgan by Reinout Böttcher.

BBVA raises interim dividend by 50%

Spain's BBVA will pay an interim cash dividend of €0.12 per share in October against its 2022 results, a 50% increase from a year ago. The interim dividend, which the lender said was backed by a net profit of €3bn in the first half, will be paid on October 11.


FCA urges insurers to treat customers fairly

The Financial Conduct Authority (FCA) has urged insurers to treat customers fairly amid concerns that the cost of living crisis may prompt households and businesses to cut back on insurance, leaving them without adequate protection – or with none at all. In a letter to chief executives in the insurance industry, the City watchdog has called on firms to ensure consumers are not sold unnecessary products or add-ons, It has also warned against issuing unfair penalties. The regulator has asked insurers to reassess customers’ needs, provide clear information and waive fees associated with adjusting a customer’s policy. Advising customers who are struggling with their finances to contact their providers as soon as possible, Sheldon Mills, the executive director for consumers and competition at the FCA, added that firms “should not unfairly penalise them for any payment difficulties but instead work with them to find solutions.”


Pubs group warns of rising costs

Phil Urban, chief executive of Mitchells & Butlers, has warned that rising energy costs and falling consumer confidence are making trading "very challenging". The boss of the pub and restaurant group behind All Bar One and Harvester said rapidly rising costs would squeeze margins next year, adding: "We are also mindful of the pressures on the UK consumer over the coming months". The company yesterday reported that sales increased by 1.5% over the 13 weeks to September 24, compared with a year ago.


Price drops point to buyers’ market

Data from Zoopla shows that 6% of homes listed for sale have seen the asking price adjusted downwards by 5% or more, with this marking the highest level since before the pandemic. The property platform said this points to a return to more of a buyers’ market, after two years of a market that favoured sellers. The Zoopla report said: “We do not believe that this is a precursor for big price falls but an indication that the rate of price growth will start to slow more rapidly in Q4 and into 2023 as buyers react to the rising cost of borrowing.” Richard Donnell, executive director at Zoopla, said: “A surge in home values over the pandemic and the rise of mortgage rates means we face a sizable hit to household buying power over the rest of 2022 and into 2023.” He went on to welcome recent changes to stamp duty but warned that an increase in mortgage rates “will erode much of the gains.” Mr Donnell went on to suggests that homeowners that want to sell their home this year “need to price realistically.”


Profits fall at the Co-op

The Co-operative Group's pre-tax profits fell 84% to £7m over the six months to July, compared with £44m over the same period last year. The company said profits in its food operation fell by £27m year-on-year due to rising costs, including a surge in energy costs - which rose to £59m from £41m - and £21m impairment in the value of a number of its food shops.  However, group revenues in the were broadly flat on last year, at £5.6bn, thanks to a "robust sales performance"

Next cuts profit forecasts

Next has reported a profit of £400.6m for the six months to July, up 15.5%, with full-price sales up 12.4%, lifted by the recovery in shop sales following the easing of the pandemic and in sales of formal wear. However, the retailer cut its annual profit and sales forecast after weak trading in August and the prospect of cost of living pressures continuing to rise. It cut its annual pre-tax profit forecast to £840m, down from a previous forecast of £860m, leaving growth at 2.1% rather than 4.5%.


Kwarteng defends mini-Budget

Chancellor Kwasi Kwarteng says his controversial mini-Budget was needed to prevent consumer spending collapsing. He told Conservative MPs that the measures, which led to a slump in the pound and prompted turmoil across the markets, had protected the economy. The Chancellor, who insisted that the Government had needed to "act quickly," said: “However I totally understand the need to be credible with markets." He added: “We will show markets our plan is sound, credible and will work to drive growth." In a WhatsApp message seen by the BBC, he said the Government is ''working at pace'' to show the markets there is a ''clear plan.'' Meanwhile, Mel Stride, chairman of the Treasury Select Committee, has written to Mr Kwarteng, arguing that the Government’s plans had "resulted in various significant and concerning reactions in the markets." Noting that the mini-Budget was not accompanied by an assessment from the independent Office for Budget Responsibility (OBR) despite the OBR saying it could produce one, Mr Stride wrote: “Some may have formed the unfortunate impression that the Government may be seeking to avoid scrutiny." He has urged Mr Kwarteng to provide an OBR forecast "earlier" than November 23, the date the Government is due to publish its medium term fiscal plan. The Mail reports that the PM and Chancellor will today hold emergency talks with OBR chairman Richard Hughes, with the spending watchdog set to present the Government with a first draft of its full fiscal forecasts next week.

Tax cuts the 'right plan' for the economy, says PM

Liz Truss has insisted tax cuts outlined in the mini-Budget are the "right plan" for the economy, arguing that "urgent action" had been required to deliver long term growth. Stressing the need for economic growth, the Prime Minister went on to say that she was "prepared to do what it takes to make that happen" and said she was prepared to take "controversial and difficult decisions." When quizzed on measures set out in the mini-Budget during TV interviews with BBC political editors, Ms Truss defended plans which include scrapping the 45p income tax band for top earners, saying there is "plenty of evidence" that reducing the tax burden would boost economic growth. The PM said the plans set out in the mini-Budget have “put this country on a better trajectory for the long-term”, but admitted that higher growth “will not come overnight.”

Carney: Government is undercutting institutions

A former governor of the Bank of England has accused the government of "undercutting" the UK's key economic institutions. Mark Carney said tax-cutting measures were "working at some cross-purposes" with the Bank in regard to “short-term support for the economy" and questioned the decision not to publish economic forecasts by the Office for Budget Responsibility (OBR) alongside last week's mini-Budget. Mr Carney told the BBC's Today programme that while ministers were right to want to boost economic growth, "There is a lag between today and when that growth might come." He went on to suggest there had been “an undercutting of some of the institutions that underpin the overall approach.”


Government ‘absolutely committed’ to triple lock - Chancellor

Chancellor Kwasi Kwarteng has said the Government is “absolutely committed” to the state pensions triple lock. Doubts were raised over whether the lock was guaranteed to go up at this month’s inflation rate after Treasury Minister Chris Philp refused to confirm whether benefits will be hiked in line with soaring inflation, telling ITV’s Robert Peston that the matter was under consideration. When asked whether the lock - which guarantees that state pensions are uprated by whichever is highest of 2.5%, wages and inflation – would remain in place, Mr Kwarteng said: “The Prime Minister has been absolutely committed to the triple lock and we are absolutely committed to maintaining it.”

More Brits turn to loan sharks as costs climb

Research from the Vulnerability Registration Service (VRS) shows that the number of UK households seeking help from loan sharks has climbed amid rising costs and soaring energy bills. The analysis shows that 1.2m people have reached out to loan sharks in the last 12 months. Separate research from the Money Advice Trust shows that around 21% of Britons are estimated to be behind on at least one household bill, while a Citizen’s Advice poll of 6,000 UK adults in May and June found that a quarter had borrowed money to pay for essential costs in the last six months.

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