Loan woe for the self-employed
Some banks are refusing to provide mortgages to self-employed workers if they took coronavirus support loans or income grants, despite the Government and the banking watchdog saying the payments would not affect credit ratings. Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said banks are referring applications from the self-employed to their manual underwriters automatically, meaning fewer self-employed people are being granted a mortgage. The Financial Conduct Authority has said making use of one of the financial support schemes should not prevent self-employed people from accessing credit. Meanwhile, analysis shows that Santander is limiting its mortgage products to 60% loan-to-value for the self-employed, while NatWest will ignore debts being cleared for employed borrowers when assessing affordability on a mortgage application but will still factor them in for the self-employed. TSB limits new self-employed borrowers to mortgages with a maximum LTV of 75%, Halifax has placed limits on how much the self-employed can borrow, Metro Bank requires more bank statements from the self-employed than other applicants and Nationwide is limiting its 90% mortgage products to salaried employees only.
Buyers being forced into longer mortgages
Rising house prices are pushing more first-time buyers into longer-term mortgages to afford their monthly repayments. About 70% of first-time buyers last year took out a mortgage with an initial term of more than 25 years, according to Nationwide's house price index affordability report. Ten years ago 45% of first-time buyers took out long-term mortgages, typically for 35 years. Nationwide also revealed that finding a deposit is still the biggest challenge for first-time buyers as house prices remain high. Trying to find a 20% deposit for a property is proving to be a major obstacle with the average 20% deposit being 104% of the average income.
Expats see new charges
Some British expats living in the EU have seen charges for moving between UK banks and local accounts following Britain’s exit from the bloc, with Spain’s Sabadell and Italian bank Unicredit now applying charges for sending or receiving money from UK accounts. A spokesman for UK Finance said: "As EU legislation governing cross-border payments no longer applies, firms are now permitted to introduce additional charges in some circumstances.”
New entrant plans 30-year fixed mortgage
New bank Perenna, which is seeking a banking licence from the Prudential Regulation Authority (PRA), says it hopes to issue its first 30-year fixed-rate mortgages in Q3 and has a target of lending £100m a month. Perenna says it would need to raise tens of millions of pounds in equity capital, probably from venture capital groups, once the PRA determines its minimum capital needs. The 30-year fix would be the market’s longest fixed-rate term, exceeding the current longest, a 15 year, 2.85% deal from Virgin Money.
Monese in talks to raise £40m
Digital bank Monese is in talks over raising £40m in cash to resume growth plans that stalled amid the coronavirus crisis. It has reportedly started discussions with investors about securing new funds and is targeting new investors for the cash raise.
Bonus for Virgin Money applicants
Virgin Money will take account of bonus, commissions and overtime earnings when calculating how much it will lend to those seeking a mortgage, having previously only considered fixed income such as salary. The bank will accept 60% of bonus, commission and overtime earnings in its affordability test for mortgages, bringing it in line with sister bank Clydesdale.
Bank backs co-ops
Co-op Bank is pumping £400,000-worth of support into start-up and existing co-op businesses this year, with the Hive scheme looking to help firms through the pandemic. Since 2016, the bank has put £1.7m into the scheme, helping more than 1,000 co-operatives and groups.
JPMorgan reports record profit
JPMorgan Chase has seen record quarterly profits, with revenues in the three months to the end of December up by 3% to $30.2bn and net profit climbing 42% to $12.1bn. America’s biggest bank was boosted by the release of some of its credit reserves and released $2.9bn that it had set aside to absorb loan losses caused by the coronavirus pandemic. Revenues in the trading business jumped 20% to $5.9bn, while in the investment banking business, a 37% increase saw revenue hit $2.5bn. JPMorgan’s net interest income fell by 7% to $13.4 billion in the quarter, while annual profits were down 20% to $29.1bn.
Citigroup beats expectations
Citigroup reported a 7% decline in fourth quarter profit to $4.63bn, down from $5bn a year earlier. Earnings equated to $2.08 per share, with this higher than an analyst consensus of $1.34 per share. It also revealed that it has released $1.5bn from its loan loss reserves. Boss Michael Corbat said the bank “ended a tumultuous year with a strong fourth quarter”. He added: “As a sign of the strength and durability of our diversified franchise, our revenues were flat to 2019, despite the massive economic impact of COVID-19.”
Airport support scheme to open in England
A financial support scheme for airports will open across England this month, the Government says, with this coming amid fresh travel restrictions. Aviation minister Robert Courts said the move was a response to the closure of all UK air corridors from today. The aim was to provide grants by the end of this financial year, he said.
Housebuilders back extended stamp duty holiday
A number of developers and housebuilders have backed a Telegraph campaign calling for the stamp duty holiday to be made permanent. Sarwjit Sambhi, chief executive of developer St Modwen, said the levy is an “impediment” to some deals, arguing that “everybody recognises” scrapping the duty is good for the economy in the long run. Greg Fitzgerald, CEO of housebuilder Vistry, believes that “from a confidence perspective”, stamp duty is better off being axed or reduced as “you will get more money from housing transactions generating tax.” Rob Perrins, managing director of Berkeley Homes, commented: “Any transaction tax is a very bad tax”.
Court rules on business interruption payouts
The Supreme Court has ruled that insurers must pay out on disputed coronavirus business interruption claims, meaning small firms could share around £1.2bn in payouts. This comes as a result of a test case brought by the Financial Conduct Authority (FCA), with the ruling potentially affecting up to 370,000 firms holding 700 types of policies issued by 60 insurers. Judges rejected appeals from six insurance companies - Arch, Argenta, Hiscox, MS Amlin, QBE and RSA - and largely supported the arguments made by the FCA and a group representing policyholders. The FCA says it will be working with insurers to ensure they “move quickly” to pay claims to businesses. Huw Evans, director general of the Association of British Insurers, said: "All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun.”
Equivalence delay may drive divergence
Industry sources say with the EU refusing to grant UK financial services access to the single market, Britain may be forced to diverge from EU rules. Citing Brussels insiders, the Telegraph says the European Commission has no immediate plans to provide British firms in 28 sectors market access through equivalence. While the UK granted the bloc equivalence in several areas of business in November, Brussels will not grant equivalence to UK firms unless the Government details how far it plans to diverge from EU rules in the future. Miles Celic, chief executive of TheCityUK, said that both markets are “dynamic and as they evolve the likelihood, and value, of equivalence will shrink”.
Impersonation scams jump 600%
Analysis by Quilter shows that the number of investment scams impersonating a regulated financial services firm has increased by more than 600% over the past decade, with the number of clone firm warnings issued by the Financial Conduct Authority hitting 453 last year, up from 62 in 2010. The reports shows that impersonation scams accounted for 37% of all warnings issued by the City watchdog over the past ten years.
LEISURE AND HOSPITALITY
Blackstone eyes Butlins
Blackstone is reportedly in exclusive talks to invest about £900m in Bourne Leisure, the privately owned company that owns Butlins, the Haven holiday chain, Warner Leisure Hotels and a number of caravan parks. A takeover of Bourne Leisure would add to Blackstone's list of leisure assets in the UK, which include the Legoland theme parks, Madame Tussauds and the London Eye owned by Merlin Entertainments.
Babcock warns of potential hit to balance sheet
Defence contractor Babcock may be forced to cut the expected value of contracts and future income following an evaluation of its balance sheet and contract profitability, with the firm looking into the matter in a review being overseen by an independent accountancy firm.
Buyers take on higher rates to avoid stamp duty
Home buyers are turning to less-common forms of borrowing to ensure their property purchases complete before the stamp duty holiday comes to an end on March 31, with the Telegraph’s Adam Williams warning that some buyers are taking on “sky-high interest rates”. He says that while bridging finance differs from a normal mortgage because it can be arranged in a matter of days, the higher cost of borrowing means it is rarely recommended for house purchases. However, the tax savings offered by the stamp duty cut mean bridging finance has become an option for some. Mr Williams says that while rates appear low, the figures of between 0.7% and 1.25% are monthly rates so the annual cost is between 8.7% and 16.1%.
Next in line for Topshop
With final bids due today, Next is seen as the frontrunner to buy Sir Philip Green’s Arcadia retail empire out of administration. The fashion chain is bidding for the group in partnership with US hedge fund Davidson Kempner. It faces competition from JD Sports, which has held talks with Authentic Brands over a joint bid, while Mike Ashley’s Frasers Group is also said to be in the running. Brands under the Arcadia umbrella include Topshop, Topman, Dorothy Perkins, Wallis, Miss Selfridge and Burton. Evans has already been hived off and sold to Australian retailer City Chic Collective for £23m.
Ashley in Peacocks bid
Sports Direct boss Mike Ashley has bid around £65m for Peacocks, the discount fashion chain which collapsed in November. If the bid – which is said to be £5m below the figure sought - is not accepted, it is believed that Peacocks founder Philip Day or his associates are likely to buy the chain’s stores. Edinburgh Woollen Mill, another of Mr Day's chains, was recently bought out of administration by Purepay, whose assets are pledged to Mr Day.
230 Jaeger jobs to go
Administrators say 233 staff will be made redundant following fashion brand Jaeger's acquisition by Marks & Spencer, with 63 stores and concessions to close as they are not part of the deal. It said 22 head office staff and 211 store employees have been made redundant. M&S has reportedly paid around £5m for Jaeger, which fell into administration in November.
GDP falls 2.6% in November
Data from the Office for National Statistics (ONS) shows GDP fell by 2.6% month-on-month in November, with the decline pushing the economy toward a double-dip recession. GDP fell to 8.5% below its pre-pandemic level in November, with the slide driven by the second national coronavirus lockdown in England. Analysis shows that GDP dipped 3% in the first three months of 2020 before registering a record 19% fall in Q2 – a period that saw the UK in its first nationwide coronavirus lockdown. While Q3 saw a record jump of 16% as growth returned, analysts expect Q4 to see another dip. With tough new restrictions currently in place, Q1 2021 is forecast to show a decline, meaning two consecutive quarters of falling GDP and a second recession. Chancellor Rishi Sunak said the ONS figures highlight the scale of the challenge being faced, saying: “It’s clear things will get harder before they get better”. Suren Thiru, head of economics at the British Chambers of Commerce, believes a “clear and comprehensive plan is urgently needed to support the economy throughout this year.”
Bank chair: Britain’s recovery may exceed expectations
William Vereker, chairman the UK arm of Spanish banking group Santander, believes the UK's economic recovery this year could be stronger than most experts predict, saying: “I can see sterling strengthening and the economy growing faster than forecast”. Mr Vereker feels the Brexit deal and the coronavirus vaccination programme could deliver a “big uptick” in consumer spending and business investment. Mr Vereker said he can see a “quick bounce-back”, with “significant” pent-up consumer demand and savings set to flow into the economy later this year. He added that the Brexit deal is “going to remove a big element of uncertainty” and encourage business investment, while “on a relative basis, the UK looks good in terms of the opportunity to invest, employ and develop businesses”.
The number of company insolvencies in England and Wales rose to 1,228 in December, data from the Insolvency Service reveals. This is up by 9.2% on December 2019 and marks the first increase since February, with Government support rolled out amid the coronavirus crisis helping prevent a number of company failures – with temporary restrictions on winding-up petitions also playing a part. Elsewhere, company insolvencies in Scotland fell by 36%, while Northern Ireland recorded a 79% decline. Data on personal insolvencies reveals a 38% increase in England and Wales over the last three months compared to the same quarter in 2019.