BANKING
Cost of fixed-rate mortgages starts to fall
Homebuyers will be able to buy a home with a mortgage below 5% for the first time in over a month after Platform, which is part of the Co-Operative Bank, announced plans to launch a five-year fixed rate mortgage at 4.84% for borrowers with deposits of 40%. Rates had jumped in the wake of the controversial mini-Budget in September. Two- and five-year fixed rates peaked on October 20 at 6.65% and 6.51% respectively, according to Moneyfacts. By November 11, these had dipped to 6.33% and 6.11% but were still well above the 4.74% and 4.75% average rates recorded before the mini-Budget. Mark Harris, of mortgage broker SPF Private Clients, said: “Fixed-rate mortgage pricing has been edging down over the past few weeks and if this continues, we would expect five-year fixes below 4% by early 2023.” Aaron Strutt of Trinity Financial brokers expects other lenders to offer lower rates, “unless something else unfortunate happens.” David Hollingworth, of L&C, another broker, said: “This marks a new step in the improvement of mortgage rates.” It is noted that a number of lenders dropped rates after the Bank of England indicated there would be no rapid ratcheting up of the base rate in 2023. At least 20 building societies and banks have reduced the rates on their fixed-rate deals since last Monday, according to Moneyfacts, including Nationwide, Halifax, Lloyds and Virgin Money.
Banks ban crypto to fight fraudsters
Banks are restricting customer access to cryptocurrency exchanges amid growing concerns about financial crime. As of this week, Santander customers will only be allowed to transfer only £3,000 every 30 days to crypto exchanges when using online and mobile banking, while Virgin Money UK plans to block payments to crypto exchanges from personal current accounts and savings accounts from November 21. Lloyds Banking Group has blocked customers from buying crypto with their credit cards since 2018. NatWest restricts payments to certain crypto exchanges and Metro Bank limits the amounts its customers can spend on them. Between January and October this year UK consumers reported £199m of losses from crypto-related scams to the national fraud reporting centre Action Fraud, an increase of 26% compared with the previous year. David Callington from HSBC comments: “Cryptocurrency scams are on the rise, with some victims losing a huge amount of money. There are sophisticated criminals trying to get their hands on your hard-earned money and they don’t care if you can’t afford it, if it is your life savings or even if it leaves you without a penny to your name.”
Banks on high alert as cyber threat rises
Britain's biggest banks have bolstered their defences against a Russian cyber-attack, with close co-operation between lenders meaning that if hackers take down a bank's website, customers will be able to access their online accounts via another. The plan involves the use of open banking technology and comes amid concern that Russia will retaliate against Western sanctions by targeting cyber-attacks on banks or infrastructure. The Mail on Sunday cites a cyber security expert who reveals that when the war in Ukraine first broke out, lenders were holding daily calls with the Financial Conduct Authority as the watchdog monitored for evidence of malicious online attempts to weaken the banking industry. Analysts at S&P Global say that although major assaults on European banks have so far not occured, there has been a rise in “smaller and more pernicious hacks.” Earlier this year, Ukraine accused Russia of cyber-attacks on two of its banks.
SMEs struggling to get loans
A poll for asset manager Channel Capital suggests that SMEs are struggling to get loans from high-street banks. The survey saw three-fifths of SMEs say they need funding to ease day-to-day cashflow issues, while more than two-thirds said they need funding to grow. Over half of the business leaders surveyed said high-street banks are too slow in assessing business loan applications. Almost half believe banks are reluctant to lend to smaller businesses. Walter Gontarek, chief executive of Channel, said: “Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies … Yet unfortunately, accessing that finance is notoriously difficult.” He added that the survey of more than 500 business leaders “highlights the poor experience SMEs often have with big banks' reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”
PRIVATE EQUITY
Buyout industry facing stress from rising borrowing costs
The faltering economy will put private equity firms that struck debt-fuelled deals at top-of-the-market valuations under increasing pressure, the boss of 3i has warned. Simon Borrows was speaking as 3i reported a total return in the six months to the end of September of almost £1.8bn. 3i reported that 91% of companies by value in its private equity portfolio had increased their earnings in the year to June 30. Its infrastructure division also posted a gross return of £35m.
SoftBank returns to profit
SoftBank returned to profit for the first time in three quarters, largely driven by the sale of a chunk of its stake in Chinese e-commerce giant Alibaba. The company generated a net profit of ¥3tn for the July to September quarter, a sharp reversal from the record loss of ¥3.1tn in the previous quarter as a result of its Vision Fund investments being hit by the global tech rout.
INTERNATIONAL
Spanish banks urged to preserve capital
The Bank of Spain has urged the country’s lenders to preserve capital so they can weather a potential deterioration of the economic outlook. The central bank said that risks to financial stability had increased since its last report on the matter in April.
FINANCIAL SERVICES
Call-in power questioned
Simon Foy in the Telegraph looks at proposals for a regulatory call-in power that would allow ministers to have an ultimate veto over decisions taken by the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA). Richard Lloyd, interim chairman of the FCA, last week voiced concern over the plans, telling the Treasury Committee: “Even if it’s used very sparingly... the perception that comes with the ability of ministers to direct independent regulators will go to undermining our independence.” He added: “We have been very clear to ministers that this is of great concern to us.” Sam Woods, head of the PRA and a deputy governor of the Bank, has also questioned the proposed move, saying a call-in power would harm the City’s competitiveness, undermine its international credibility and create a system in which “financial regulation blew much more with the political wind.” Andy Bell, founder of investment platform AJ Bell, says he supports the power “in principle”, but cautions that it should be “used sparingly and not as a means to politicise City regulators, whose standing is a proxy for confidence in the UK.” City Minister Andrew Griffith has insisted that the power would only be used “where there are matters of significant public interest.”
Bankman-Fried’s FTX files for bankruptcy
Cryptocurrency exchange FTX was forced to file for bankruptcy protection in the US on Friday after a massive liquidity crunch collapsed the company. Binance offered to bail out the firm but backed out after reportedly finding an $8bn hole in the company's books. Founder Sam Bankman-Fried saw his $16bn fortune wiped out after last-ditch attempts to save his troubled businesses ended in failure. Alameda Research, Bankman-Fried’s trading firm, and a slew of other businesses linked to FTX, are also bankrupt. Binance CEO Changpeng Zhao said there are likely to be “cascading effects” from FTX’s collapse but the crypto sector would eventually recover.
Market downturn spurs ESG fund exodus
Data from Refinitiv Lipper show funds of equities, debt and other asset types dedicated to responsible investing posted net outflows globally of $108bn this year to the end of September. Moreover, investors pulled money out of responsible investment funds faster, relative to their size, than broader market funds for all but two months of 2022 through September. Investors eschewing ESG funds during a market downturn demonstrates a willingness to prioritise capital preservation over goals such as tackling climate change, analysts say.
Beazley braces for $120m of losses from Hurricane Ian
Beazley is facing $120m of losses from Hurricane Ian after the storm left a trail of devastation in the United States and Cuba. The insurer disclosed its Hurricane Ian loss estimate in a third quarter update in which it reported that gross premiums written had increased by 22% year-on-year to $3.98bn in the nine months to September 30 from $3.27bn in 2021.
Lord Mayor: City must provide ‘financial resilience’ during recession
Nicholas Lyons, the Lord Mayor of London, says the City must help provide “financial resilience” to help the UK get through a possible recession. He has called on the financial services industry to “find ways to help people bridge this crisis by providing insurance premium waivers, affordable credit, and debt repayment deferrals.” The Lord Mayor added: “The private sector must take a lead in driving growth and investment so that the UK can bounce back strongly when these inflationary times are past. The City has the skills and the ambition to finance a brighter future for all.”
HEALTHCARE
AstraZeneca abandons bid to get Covid vaccine approved in US
AstraZeneca has said its application for Emergency Use Authorization of its COVID-19 vaccine in the US would be dropped claiming the process had become over-complicated. The Food and Drug Administration (FDA) refused to give it the green light over incomplete data and fears over the jab's links to blood clots.
REAL ESTATE
House repossessions creep up
New data from UK Finance show home repossessions rose 15% between July and September this year compared to the previous quarter. Some 700 homeowner mortgaged properties were taken into possession in the third quarter of 2022 while the number of buy-to-let properties taken into possession rose 11% to 390. Inflation and rising borrowing costs are blamed for the rise. Citizens Advice estimates that more than a quarter of mortgage holders wouldn't be able to afford their monthly repayments if they increased by £100 a month.
ECONOMY
GDP shrinks in Q3
The UK economy contracted by 0.2% between July and September, according to data from the Office of national Statistics. This was below analysts’ forecasts of 0.5%, but if October to December shows another fall the UK will technically be in recession - defined as two consecutive quarters of decline. A recession has been widely expected due to soaring inflation and the Bank of England said the battle to bring it down could take two years. Growth in services output ground to a halt in the third quarter while industries including retail and wholesale, and arts, entertainment and recreation declined over the period. Household spending fell by 0.5% on the quarter once adjusted for the jump in prices. Sanjay Raja, economist at Deutsche Bank, said the contraction was the result of “continued weakness in household and business confidence, higher inflation and higher interest rates in the economy.”
Public finances set to slip deeper into the red
Analysts at Bank of America forecast that soaring inflation and the increasingly expensive energy rescue package will send government borrowing up by an extra £90bn this year and £99bn next year, sending the budget deficit up to £189bn this financial year and £149bn in 2023/24.