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Daily News Roundup: Monday, 15th June 2020

Posted: 15th June 2020


First-time buyers hit by 10% deposit deal shortage

First-time buyers are being locked out of the housing market as there are very few mortgages available to those who can only manage a 10% deposit. When the property market shut down on March 27 just over 30 lenders withdrew mortgages requiring 10% deposits because they could not carry out physical valuations on houses, according to mortgage broker Private Finance. Although the market was reopened last month, few banks have reintroduced the deals. Analysis by Moneyfacts shows that of 2,759 residential mortgage products available, there are just 106 90% LTV deals – representing just 3.6% of the market. Accord Mortgages, a division of Yorkshire Building Society; Virgin Money; and Clydesdale Bank have recently pulled out of the 90% loan-to-value mortgage space, with Ipswich Building Society withdrawing its 90% products last week. However, Bank of Ireland has returned to 90% lending, while Coventry Building Society is set to re-enter this market. Nick Morrey, product technical manager at mortgage broker John Charcol, said that as of last Thursday, no lender was offering 95% mortgages through brokers and other intermediaries, with Nationwide offering 95% via its branch network. HSBC is the only big provider offering deals over 90% but, due to demand, is offering just half an hour a day when brokers can try to secure them for clients. Meanwhile, TSB has become the first bank to withdraw mortgage deals for customers with a 15% deposit amid fears of a fall in house prices.

Mortgage holiday could leave homeowners out of pocket

Taking an extended mortgage holiday could leave homeowners £4,000 out of pocket - equivalent to an extra £47 on their monthly bills. There are growing concerns that homeowners who take advantage of the scheme during the crisis could be facing further costs later on. Government rules mean that borrowers can ask to take a break from their mortgage payments for up to six months if they have been financially affected by the coronavirus. Analysis by Private Finance found that the cost of doing so could quickly mount as interest continued to accrue during any mortgage holiday. A homeowner with a £200,000 mortgage and 20 years remaining on their term would pay an additional £3,935 in interest over the span of the mortgage if they took a six-month payment break, based on a typical standard variable rate of 4.5%. This is the equivalent to adding £47 a month to mortgage repayments once the payment holiday is over. Chris Sykes of Private Finance said many people had rushed into payment holidays "in a panic".

Lloyds looks to downsize office space

Lloyds Banking Group is exploring options to reduce its property footprint. With an increasing number of staff transitioning to home working, Lloyds is seeking to consolidate its presence to six strategic hubs across the UK. The bank’s people and property director Matt Sinnott said that due to “changes to the way we work” it was likely Lloyds would “need fewer buildings and different types of spaces” in the future.

Marcus restores fixed term savings account

A fixed term savings account from Marcus by Goldman Sachs, which was offering an interest rate of 1.4% when it was temporarily removed from the market in May, has been reintroduced with an interest rate of 1% AER/gross (fixed) over a one-year period. Customers can save from £1 up to a maximum of £250,000 in the online account.

RBS developing new security tech

Royal Bank of Scotland is developing behavioural biometrics technology which could replace bank passwords. The technology, which has been customised in partnership with Visa for the purpose of increased transaction security, analyses the unique ways a customer interacts with their device when making an online purchase.

Lib Dem vows to act on bank closures

Liberal Democrat leadership hopeful Layla Moran has pledged to tackle high street bank closures by making it more difficult for the last branches in a town to be closed. Councils would be given a veto blocking a branch closure for 12 months to allow another bank to be brought in and any closure would have to be approved by the Financial Conduct Authority.


Former FRC chair joins Carlyle

Former Financial Reporting Council chairman Simon Dingemans, who left the role in May, has joined private equity firm Carlyle Group as a managing director in charge of UK buyouts.

KKR asks its advisers for discounts to share the pain

US private equity group KKR has asked its legal and financial advisers to provide discounts on their work and share in the “economic pain” caused by the coronavirus outbreak.


Commerzbank rejects Cerberus’ demands for board seats

Commerzbank has rejected demands by top investor Cerberus for two seats on the bank's supervisory board, according to a letter seen by Reuters. A letter from Commerzbank's chairman Stefan Schmittmann to Cerberus said: “We don't have any vacancies”. The letter said that Cerberus was a "very important shareholder" and would have "ample opportunities" to offer its input to the bank's leaders.


Airlines launch legal action over quarantine

British Airways, easyJet and Ryanair have launched legal action against the Government, over the country´s “flawed” plan to quarantine most incoming travellers. The airlines said in a statement that the quarantine will have a "devastating effect” on tourism and the wider economy. They want the Government to re-adopt its previous policy, where quarantine is limited to passengers from "high risk" countries. The legal challenge is based on four arguments, including that the measures are more stringent than for those who have tested positive for coronavirus. They also highlight that exemptions are already given to EU workers commuting to the UK.


Insurers paying out over coronavirus

Facing the prospect of a High Court battle with the Financial Conduct Authority (FCA), a number of insurers have opted to pay out on business interruption claims that they had previously refused to. The FCA has filed a legal action against eight insurers over disputed claims that came amid the coronavirus crisis. The FCA said that several unnamed insurers who had refused to hand money to policyholders backed down when challenged to argue their position in court. The Sunday Telegraph reports that Axa and subsidiary Axa XL have paid out under policy wordings that are “strikingly similar” to those of rivals which have so far refused to pay out on claims for losses suffered during the pandemic – including QBE, Argo and at least one Lloyd’s of London syndicate.

Young people shunning fund managers

New research from Hargreaves Lansdown has revealed that between March 23 and the end of May, some 37% of pension fund investments made by people under 30 went into tracker funds, while the over-60s invested only 22% of their pension money this way. Tracker funds now account for about 18% of the funds industry, up from about 6.6% before American funds group Vanguard entered the UK market.

FCA warns of Financial Services Register clone

The Financial Conduct Authority (FCA) has warned of an attempt to reproduce its Financial Services Register on a non-FCA website. In a statement, the regulator said: “We are currently working to get the page taken down and have alerted members of the public through our website and social media channels.”

Amigo founder looks to oust board

Amigo shareholders will this week vote on founder James Benamor's plan to oust the entire board. Mr Benamor, who owns 60.7% of the guarantor loans group, is calling for the board to be removed in a row over the firm's lending practices and is calling for investors to approve a new chairman and chief executive. Amigo’s board argue that the move would destabilise the firm. Mr Benamor, who holds his stake of Amigo through his Richmond Group, has pledged to sell his entire stake by offloading 1% every day if his nominees are not voted in.

Harrison insists Schroders will remain independent

Emma Dunkley in the Sunday Times interviews Schroders boss Peter Harrison who insists the fund manager will remain independent, fearing what he calls “culture clash”. He also talks about what the future holds for Schroders and in particular the joint venture with Lloyds called Schroders Personal Wealth, to provide advice to the affluent masses. The new service has 300 advisers and wants to grow to 1,000.

Men in financial services avoid pay cuts

New Economics Foundation research for the Sunday Times shows men in financial services are the only group of workers who have been spared a coronavirus pay cut. While their average weekly earnings remained flat between February and April, women in the industry saw their pay fall by 5%.


Manufacturers call for business rates break

With a survey from Make UK showing manufacturing output hit a record low in Q2, manufacturers have called for a stimulus package that would include a business rates holiday. The study shows output fell to -56% in Q2, with domestic and international orders falling to -52%. Just 12% of businesses in the sector said they were operating at full capacity, while 36% said they were running at between zero and half capacity.


Property sales rebound

Figures from Rightmove show that estate agents in England have seen a rebound in house sales since coronavirus lockdown restrictions were eased on May 13. While sales during the lockdown fell by 94%, by June 5 sales were just 3% below their level a year earlier and averaged two thirds of their previous level over the three previous weeks. The data also show that typical asking prices on the platform were 1.9% up on pre-lockdown averages.


Retailers set to reopen

Thousands of non-essential shops in England are set to open today after 12 weeks of lockdown, with major chains such as Primark, River Island, JD Sports and Sports Direct among 3,112 of 5,182 shops that will take advantage of the Government's lockdown relaxation. The British Retail Consortium says COVID-19 has led to nearly £2bn in lost sales and new social distancing rules are set to put further pressure on already thin profit margins. Kurt Geiger has claimed it costs £75,000 per store to make them COVID-compliant, which includes disposable socks and gloves, hand sanitiser and wipes, PPE, screens, extra cleaning and two-metre signs on the floor.


GDP falls by record 20.4%

Figures from the Office for National Statistics (ONS) show that the economy shrank at its fastest pace on record in April, with GDP declining by 20.4%. This follows a 5.8% fall in March and 0.2% dip in February, with GDP down 10.4% over the three-month period. The analysis shows that the economy was 25% smaller in April than in February. All large sectors have been hit by the lockdown rolled out amid the coronavirus crisis, with car manufacturing falling 90.3%, the hospitality sector down 88.1% and private housebuilding dropping 59.1%. Prime Minister Boris Johnson said the while the economy would see “big, big economic knock-on effects” from COVID-19, Britain can “bounce back” from the crisis. He said: “We’re going to work slowly to get the economy back on its feet.” Bank of England governor Andrew Bailey said the ONS figures were “not surprising” and "pretty much in line" with what the Bank expected.


BoE links with Beano

A tie-up between the Bank of England (BoE), Beano comics and Tes - formerly the Times Educational Supplement – will see characters such as Dennis the Menace help teach children about financial matters. The 'Money and Me' scheme is being launched next month and will be taught to primary pupils aged five to 11. BoE governor Andrew Bailey said: “Financial literacy is essential for everyone”, adding that the initiative “will support teachers in giving young people a strong sense of the importance of economic and financial decisions from an early age.”

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