Chancellor could extend mortgage guarantee scheme
Kwasi Kwarteng is understood to be considering an extension to the Government’s mortgage guarantee scheme following a meeting with bank bosses on Thursday. CEOs from NatWest, Lloyds Banking Group, HSBC, Santander and TSB along with executives from Barclays, Nationwide, Virgin Money and Starling Bank were asked to comment on a number of options to support consumers struggling to secure mortgages. The Chancellor is now mulling an extension to the mortgage guarantee scheme beyond its December deadline. The guarantee compensates a lender for losses suffered in the event of the property having to be repossessed and it is hoped that by extending it lenders will feel more confident offering reasonably priced low-deposit mortgages. Ray Boulger, broker at John Charcol, said an extension of the mortgage guarantee scheme would be “good news for anyone in need of a mortgage with only a 5% deposit.”
FCA issues warning over high-cost lenders
The Financial Conduct Authority has written to high-cost lenders asking them to tighten credit and affordability checks as consumers face increased financial pressures and reduced disposable income. Roma Pearson Director, Consumer Finance Supervision at the regulator, told lenders it was “particularly important” that firms “mitigate the risk of poor consumer outcomes” and provide support to vulnerable customers. The warning comes as the FCA prepares to introduce its new consumer duty next year which will require regulated firms to work to actively deliver good outcomes for retail customers.
Mortgage crisis spreads to buy-to-let loans
The number of fixed-rate mortgages available to landlords has fallen by 70% in recent weeks as lenders strip deals from the market. At close of business on Wednesday, just two two-year fixed rate mortgages for buy-to-let landlords purchasing through a company were available. Just under seventy two-year fixed-rate deals remain available for landlords purchasing as individuals. Lenders have also made affordability tests more strict, with some lenders asking landlords to prove they can afford rates of 8.49%, experts said.
Bank chiefs list red tape concerns
During a meeting with the Chancellor on Thursday, bank chiefs voiced their concern over the Financial Conduct Authority’s incoming consumer duty regulations, which they said could block banks from offering products that could help customers long term. Bosses also raised questions about ringfencing rules that separate regular savings and current accounts from investment banking operations. Additionally, executives from smaller banks discussed lowering the amount of loss-absorbing capital they need to raise and hold against risky assets, according to the Guardian.
Private equity firm raises €5bn for latest flagship fund
Private equity company Antin has raised more than €5bn for its Flagship Fund V, which aims to invest in the energy, telecom, transport and social infrastructure sectors.
Credit Suisse could suffer $3bn loss by year-end
Credit Suisse could see losses swell to $3bn by the end of the year, Moody’s predicts, up from the $1.92bn lost in the first half. The result could mean the Swiss bank’s core capital ratio stays "consistently" below 13%, which would be "credit negative" for the bank. "The current market environment is not supportive of restructuring and is not supportive of Credit Suisse's current capital market business model," said Alessandro Roccati, senior vice president in the financial institutions group of the rating agency. "Deteriorating market conditions have affected the potential realisation value of businesses they were considering to sell." Meanwhile, the bank is selling the five-star Savoy hotel in the centre of Zurich for around 400m Swiss francs (£361m), a move blogsite Inside Paradeplatz described as a "king-size distress signal".
Rolls-Royce chief says reporting on emissions was “a pain”
Rolls-Royce boss Warren East told a conference in London this week that he regretted signing the aircraft engine maker up to a government-backed net zero initiative ahead of the Cop26 climate summit. Joining the Race to Zero pledge had burdened the company with onerous reporting duties. “We need to make sure that policy provides industry with enough flexibility to be agile, to react as opportunities emerge, and as things change,” he told an audience at The Economist 's Sustainability Week conference in London. “The very insistent measuring, reporting and spurious accuracy being demanded by the regulatory environment, it causes friction and it slows everything down.” However, East said he stood by the decision to sign up to the climate campaign. “It was the right thing to do, and we've got a big problem to solve,” he said.
UK construction pessimism mounts
The latest S&P Global/CIPS construction purchasing managers’ index reveals that optimism fell to its lowest since July 2020 last month as the sector saw its worst month for new orders for almost two-and-a-half years. The report showed a reading of 52.3 in September, up from 49.2 in August. A reading above 50 indicates growth. Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey, said: “UK construction companies experienced a modest increase in business activity during September, but the return to growth was fuelled by delayed projects and easing supply shortages rather than a flurry of new orders.”
Bank confirms pension funds almost collapsed last week
After being asked to provide further details about its recent market intervention by the chairman of the Treasury Select Committee, the Bank of England has confirmed that it set aside £65bn for an emergency gilt-buying programme after pension funds ran into trouble as yields rose rapidly during the last week of September. Sir Jon Cunliffe, the Bank's deputy governor for financial stability, explained that the Bank was forced to act after a number of liability-driven investment (LDI) fund managers warned their funds could collapse in a matter of hours. Bank staff worked through the night on Tuesday and into Wednesday morning last week to prepare the unprecedented package which would see it buying up a large number of targeted government bonds in an attempt to head-off a rapid collapse of a raft of institutions, Cunliffe said. The BoE has spent just £3.8bn in the first seven days of its programme with the possibility of larger central bank purchases acting to successfully reassure the market and give other buyers the confidence to step in.
Lender launches new £300m funding plan for fintech SMEs
The data-driven lending firm Channel Capital Advisors has launched a new £300m funding plan for fintech SMEs. The fund, which has backing from global investors, will support digital lending fintech platforms that need cash to finance their loans to smaller and medium-sized firms. “The investment into our Fintech Lending Fund is a significant step forward for Channel” said Paul Wilson, its chief investment officer. “It will see us work closely with other digital platforms to facilitate loans for SMEs that are faster, simpler, and don’t dilute their business.” A third of the available cash will be release immediately.
Lloyd’s of London investigates possible cyberattack
Lloyd's of London is probing a possible cyberattack against it after detecting “unusual activity” on its systems this week. The insurance market said it had reset its network and systems and turned off all external connectivity, including Lloyd’s delegated authority platforms. “We have informed market participants and relevant parties, and we will provide more information once our investigations have concluded,” a spokesman added.
MPs to scrutinise ESG industry amid greenwashing claims
Lawmakers on the UK’s Business, Energy and Industrial Strategy (BEIS) Committee said they would be launching a probe into the environmental, social and governance (ESG) investment industry next week amid growing concerns of “greenwashing”. There are “questions about the extent to which companies may be using ESG disclosures to mislead or “greenwash” investors about the extent to which they behave ethically,” the committee said in a statement on Thursday.
Former SEC chairman joins AmEx board
Jay Clayton, former chairman of the U.S. Securities and Exchange Commission, has joined the board of directors of American Express.
LEISURE & HOSPITALITY
Hays Travel returns to profit
Independent travel agent Hays Travel has returned to profit for the first time since the pandemic struck. The company reported that its pre-tax profit hit £14.4m in the 12 months to the end of April. Bookings jumped 221% compared to the prior year, rising above £1bn.
British shoppers tightening their belts
A new survey reveals sales performance was the slowest since shops reopened after COVID-19 lockdowns, with total like-for-like sales in September increasing by just 2.8% year-on-year. This comes after a rise of 3.6% in August, which was the previous lowest post-COVID performance.
IMF warns the world is edging closer to a global recession
The International Monetary Fund has warned countries against providing “indiscriminate fiscal support" to tackle rising energy prices as this would boost demand and make it even harder to fight inflation. The comments have been read as implied criticism of policies put in place by the UK and Germany, which has launched a €200bn energy bailout, sparking criticism from fellow EU countries concerned that the move could distort energy markets on the Continent. Kristalina Georgieva, the head of the IMF, urged governments to maintain a "laser-sharp focus on lower-income households", adding: "We know that controlling prices for an extended period of time is not affordable - nor is it effective." Ms Georgieva went on to say that there could be even more economic shocks facing the global economy. "Financial stability risks are growing: rapid and disorderly repricing of assets could be amplified by pre-existing vulnerabilities, including high sovereign debt and concerns over liquidity in key segments of the financial market," she said.
UK businesses predict record price rises to offset higher wage bills
Higher wage costs driven by a tight labour market will drive up price rises at their fastest pace since 2017, businesses leaders have said, with price increases of 6.6% expected in the year ahead.