Banks cut mortgage rates after BoE warning
High street banks have announced cuts to their fixed mortgage rates after Bank of England Governor Andrew Bailey warned that homeowners were being overcharged. While the Bank announced on Thursday that the interest rate would rise by 0.75 percentage points to 3%, Mr Bailey warned that the higher base rate “should not lead to higher mortgage rates” for mortgage borrowers. He also suggested that lenders should look to start decreasing rates, saying greater market certainty “should be reflected through into mortgage rates.” More than half a dozen lenders reduced rates on fixed-rate deals the day after the central bank’s announcement, according to Moneyfacts. Halifax and Virgin Money were among the first banks to announce mortgage rate reductions. HSBC reduced rates on a selection of its fixed-rate mortgages, Nationwide Building Society has cut rates for its existing customers switching onto a new deal and Barclays has cut interest on its standard variable rate deals for residential and buy-to-let customers. Clydesdale Bank, part of Virgin Money, has also cut rates. Smaller lenders have also acted to cut rates, including the Cumberland Building Society, Yorkshire Bank, Principality Building Society, Leeds Building Society and specialist lender Hodge. Across the market, the average two-year rate fell to 6.45% on Friday, down from a peak of 6.65% on October 20. The average five-year fix fell to 6.28%, down from 6.51%.
Santander to block transfers to crypto exchanges
Santander will block UK customers from sending real-time payments to cryptocurrency exchanges next year. In a bid to protect customers from scams, the bank will introduce a block on all real-time payments to cryptocurrency exchanges made via telephone banking and in-branch payments, as well as online and mobile banking. As of November 15 this year, it will also join other UK retail banks in limiting customer transfers to cryptocurrency exchanges. When making transfers to crypto exchanges via mobile and online banking, Santander customers will face limits of £1,000 per transaction and £3,000 in total in a rolling 30-day period. The bank said: “Keeping our customers safe from cryptocurrency scams is a top priority.”
Ping An calls for HSBC break-up
Chinese insurer Ping An has called for the break-up of HSBC, while also calling on the bank to pursue “much more aggressive” cost cuts. Ping An privately told HSBC in February that it wanted the bank to spin off its Asia business from its operations. SBC hit back, arguing that the group's strengths were in being a global business. While CEO Noel Quinn last month said the matter was “closed” but Ping An Asset Management's chairman Michael Huang has now said: “We will support any initiatives including a spin-off that are conducive to improve HSBC's performance and value.”
MPs call on banks to pay savers more
MPs across the political spectrum have called on banks to pay savers higher rates of interest following hikes to the Bank of England base rate. The Bank Rate rose to 3% on Thursday, but the average savings rate is still just 0.4%, up from an average of 0.01% in December. Analysis by Hargreaves Lansdown shows if banks had passed on rate rises in full, they would have been paying 2.16% last week, resulting in total interest payments of £8.1bn since December. That represents a gap of £6.8bn.
Will central banks soon need a bailout?
Both the Times and the Telegraph run a piece on central banks. Jamie Thompson, head of macro scenarios at Oxford Economics, says in the Times that central banks are facing credibility problems as populations lose faith in their ability to control inflation. That said, not all agree with inflation targets as they stand. Ambrose Evans-Pritchard is tougher in the Telegraph, asserting that central banks have blundered badly since the financial crisis by pushing the quantitative easing experiment too far. Hiking interest rates has harmed the US Federal Reserve which has incurred a paper loss of $1trn (£880bn) this year on its $8.7trn balance sheet of US Treasuries and mortgage debt. Analysts say the Fed will be "deep in the red" by next year. Elsewhere, the Swiss National Bank has so far this year lost $143bn on its asset holdings, equal to 20% of Swiss GDP. A BIS report from 2018 warned of a collateral crisis in the "marked-to-market value of derivative contracts" leading to distress fire sales – a threat regulators ignored. Philip Turner, one of the authors of the BIS report, says a decade of financial alchemy has left the global system overleveraged, opaque, and an accident waiting to happen. "UK pension funds are just the first bodies to float to the surface," he said. Finally, the Express reports that the average workplace pension is worth £89,000 less than a year ago due to rising interest rates and gilt yields with values expected to plunge further following the BoE’s rate rise on Thursday.
Watchdog orders Deutsche Bank to step up money laundering controls
German finance watchdog BaFin has told Deutsche Bank to take specific measures to improve its money laundering prevention efforts or face fines. Deutsche Bank said there were no new findings in BaFin's order, that the deficiencies were previously identified, and that deadlines were mutually agreed.
FCA cracks down on record rate of financial promotions
The Financial Conduct Authority amended or withdrew 4,151 financial promotions between July and September. This marks the highest total since the City watchdog started publishing the data. The FCA, which reviewed 340 promotions in Q3, issued 303 warnings about unauthorised firms and individuals, with over 20% in relation to clone scams. Retail lending accounted for 46% of interventions, while 24% involved retail investments. Retail banking accounted for 24% and 6% targeted pensions and retirement income. Mark Steward, executive director of enforcement and market oversight at the FCA, said: “As consumers feel the financial squeeze, they could be tempted by high risk, unregulated products and services or they could become a target for scammers preying on moments of vulnerability.” He added that the watchdog is “doing even more” to tackle false claims in adverts and issue prompt warnings to consumers. Mr Steward went on to say that changes to the Online Safety Bill to cover paid-for financial services advertising online “are very much needed right now.”
Prudential boss rejects claims break-up was poorly executed
Investment banking analysts and insurance insiders have claimed Prudential’s break-up has been a disaster with management blamed for “screwing up” the execution of the plan, which began in 2019 with M&G being hived off. This was followed by the separation of Pru from its US business Jackson last year. The plan was to sell off Pru's constituent parts and focus on Asia. But the company was worth about £50bn before the M&G separation in 2019. Now it is worth just £23bn. Amid poor returns, critics say Prudential needs to be more transparent about its available capital and what it intends to do with it. But Prudential's interim boss Mark FitzPatrick said the group had spent the last four years preparing and amassing the firepower needed to take advantage of the opportunities presenting themselves in Asia and Africa.
MEDIA & ENTERTAINMENT
PM expected to shelve privatisation of Channel 4
Rishi Sunak is expected to scrap the proposed privatisation of Channel 4. Sunak backed the move during his leadership campaign, arguing that Channel 4 needed a commercial owner to help it survive the rise of streaming services such as Netflix and Amazon. Sources say plans to privatise the public service broadcaster will now be dropped from the upcoming media bill as the Prime Minister overhauls a range of policy pledges.
Buyer demand dips 20%
Rightmove saw a 20% month-on-month fall in buyer demand in October, with a year-on-year decline also coming in at 20%. New properties coming onto the market on the property portal dropped by 12% between September and October, although the total increased by 13% compared to October 2021.
FCA swoops on buy-now pay-later firms
The Financial Conduct Authority has warned some buy-now pay-later (BNPL) bosses and retailers that any communication or “explainers” on BNPL products constitute “financial promotions” and therefore fall within its jurisdiction. The City watchdog does not directly regulate BNPL products, but has warned providers they could face up to two years in jail if they fail to fall in line with financial promotion rules. Debt campaigners have been sounding the alarm over the unregulated nature of the products for well over a year, but BNPL insiders say the FCA is using a “loophole” to enforce regulation on the sector and choke off revenue.
Bond market pressures continue for BoE
City traders are warning of mounting stress in the repo market and a scarcity of short-dated UK debt just weeks after the post mini-Budget bond chaos pushed Britain’s pensions funds to the brink of collapse. The Bank of England started unwinding its quantitative easing (QE) programme last week, issuing its first bond sales under quantitative tightening (QT). Antoine Bouvet, rates strategist at ING, said: “It is becoming increasingly difficult to buy short-dated gilts, or to borrow them via repurchase agreements (repo).” He added that the strong demand for the shortest dated bonds in the Bank’s first QT sale reinforces the “impression of a shortage of bonds” in this part of the gilt market. Further short-dated bond sales by the Bank should help alleviate gilt scarcity in due course, however.
Real incomes face tight squeeze, think-tank warns
The Resolution Foundation think-tank has warned that the UK faces the tightest squeeze on real incomes since the Second World War due to soaring inflation. With the Bank of England forecasting that Britain is set to see its longest recession since records began in the 1920s, the Foundation has cautioned that the average household will be £800 worse off in 2023. James Smith, research director of the Resolution Foundation, said: “By the end of 2024, 5.1m households will see their mortgage costs increase substantially, with an average annual increase in the region of £3,900 relative to autumn 2022.” He added that the Bank’s forecast that GDP is set to contract for two years “showed a grim outlook for the UK economy,” noting that it would be the longest recession on record.
UBS and Julius Baer trial offering wealth advice in the metaverse
UBS and Julius Baer have been experimenting with interacting with clients in the metaverse, but the wealth managers have reportedly struggled to overcome data security issues and motion sickness.