BoE predicts mortgage pain ahead for millions
Mortgage payments will rise by at least £500 a month for nearly one million households by the end of 2026, according to the latest Financial Stability Report from the Bank of England. Those on cheap fixed deals who remortgage by the end of 2026 will see a sharp jump in costs of at least £6,000 a year, economists at the Bank said. Of the near-million facing an increase of at least £500-a-month, around 200,000 will see their bills rise by £1,000 or more. In the shorter term, the average household coming off a fixed rate deal in the second half of 2023 will have to pay about £220 more a month if they refinanced at current rates. The proportion of households under pressure because of rising mortgage payments had risen from 1.6% in November 2022 to about 2%, the BoE said, with the figure likely to reach 2.3% by the end of the year, affecting about 650,000 households. On Wednesday, the average rate on a two-year fixed mortgage hit a fresh 15 year high of 6.7%, according to Moneyfacts.
UK’s largest banks would be ‘resilient’ in an economic crisis
The Bank of England’s annual stress tests of the UK’s largest banks found they have enough capital to ride out a potential economic crisis. Britain's eight biggest banks - NatWest, Barclays, Standard Chartered, Virgin Money, Santander, Lloyds, HSBC and Nationwide - had enough capital to weather theoretical shocks under a scenario which the BoE said was more severe than the global financial turmoil of 2008. "The UK economy and financial system have so far been resilient to interest rate risk," BoE Governor Andrew Bailey said, though he noted the full impact of higher interest rates had yet to be felt. Bailey also pointed out that banks could afford to pay customers a higher return on their deposits and were in a “strong position to support customers who are facing payment difficulties.”
BBB is back with plan for pension funds
The Times talks with Louis Taylor, the new chief of the British Business Bank about the state economic development agency’s plans to boost investment into UK companies. The BBB has been preoccupied over the last three years with the administration of pandemic support schemes, for which it received heavy criticism. Looking forward, Taylor talks about a new £200m South West Investment Fund, which is part of a broader network of regional funds that Taylor hopes will attract private sector partners. Taylor is also hoping to convince ministers to give the BBB greater independence by allowing it to keep and recycle the proceeds of funds it manages. “We have foresight about future funding for a few years. Some of that money has to go back to government once we get the investment return. If all of that money was made permanent, we could recycle the returns, that would be terrific.”
Barclays wins UK Supreme Court case over push payment fraud
Barclays has won a landmark legal ruling that banks are not liable for fraudulent transactions that have been requested by account holders. Fiona Philipp, a music teacher, and her husband, brought a claim against Barclays after they were conned into sending £700,000 in an Authorised Push Payment or “APP” scam to a fraudster’s bank in the United Arab Emirates. Supreme Court Judge George Leggatt said requiring banks to block payments expressly requested by customers themselves, even in cases where fraud was suspected, was “inconsistent with first principles of banking law”. The ruling comes as the Payment Systems Regulator is set to bring in new rules requiring banks and payment companies to reimburse victims of APP, which cost victims nearly £500m last year, according to the latest figures from UK Finance.
Barclays opens pop-up services in garden centres and cricket clubs
Barclays is offering its services in locations such as museums, cricket clubs and local arts centres for few hours a day as part of its new flexible banking strategy. The lender has closed over 1,000 branches since 2015. Its new pop-up facilities, which do not offer cash services, are a result of reimagining “where and how we show up to provide the best service for customers now and in the future,” according to Jo Mayer, Head of Everyday Banking at Barclays. James Daley, of consumer advocate group Fairer Finance, said: “This idea is not going to do very much for many customers.”
Buy-to-let mortgage rates hit highest rate in 12 years
The average rate on a two-year fixed-rate buy-to-let mortgage hit 6.96% on Wednesday, according to Moneyfacts, surpassing the previous peak of 6.9% reached after the mini-Budget last October. The two-year average now stands at the highest level since at least 2011 when Moneyfacts began collecting data. The fresh high comes as the Bank of England warned in its latest Financial Stability Report that tax hikes, soaring interest rates and red tape will force more landlords to put up rents or sell their properties.
Monzo explores tie-up with Danish rival
Monzo is reportedly in preliminary talks with Danish fintech company Lunar as it looks to expand its presence in Europe. Lunar, a digital-only bank with a valuation of $2.2bn, has over 650,000 users across Denmark, Sweden, and Norway. Monzo, valued at $4.5bn, suffered a £116m loss last year due to increased bad loan provisions. Both Monzo and Lunar declined to comment on the potential partnership.
Bank of London expands into Europe with 300 new hires
Bank of London is set to hire 300 staff and has applied for a banking license from the EU as part of its expansion plans in Europe. The bank will invest €200m in setting up a base in Luxembourg, aiming to build a workforce of 300 in the country over the next five years.
SoftBank mulls US listing for PayPay
SoftBank is considering a US listing for its PayPay payments business, aiming to tap into higher valuations tech companies generally achieve there. However, the timing of the listing is still uncertain as PayPay needs to demonstrate a clear path to profitability.
JPMorgan looks to take advantage of SVB collapse
JPMorgan will attempt to capitalise on the demise of Silicon Valley Bank (SVB) by hiring dozens of venture and start-up focussed bankers.
New Renault-Geely engine firm to have HQ in UK
A new global company being launched by French motor giant Renault and Chinese carmaker Geely is set to have its headquarters in the UK. The firms will invest up to £6bn to develop low-emission petrol, diesel and hybrid engines. "We are proud to join forces with a great company like Geely... to disrupt the game and open the way for ultra-low-emissions ICE [internal combustion engine] technologies," Renault chief executive Luca de Meo said. Saudi energy giant Aramco is thought to be considering a strategic investment in the company.
Close Brothers mulls sale of wealth arm
Close Brothers Group is exploring the potential sale of its wealth management unit, according to a report from Bloomberg Law, with the firm allegedly working with Goldman Sachs on a review of the business. A potential sale could be worth up to £300m, sources told Bloomberg.
Banking license slips away from Fiinu
The survival of fintech firm Fiinu is in doubt after it failed to secure enough funding to resubmit its application for a banking license. Shares in the digital lender plummeted by 66% after the announcement. The company said it will now cut costs at its subsidiaries, including staff reductions and renegotiating agreements with suppliers.
Swiss Re nominates new chairman
Swiss Re has announced that Jacques de Vaucleroy, its deputy chairman, will be promoted to the role of permanent chairman of the board. This comes after the resignation of his predecessor, Sergio Ermotti, who will now lead UBS.
MEDIA & ENTERTAINMENT
Elon Musk announces new AI start-up
Elon Musk has launched a new artificial intelligence start-up called xAI. The company's website says its goal is to "understand the true nature of the universe." Elon Musk was the one of the original backers of OpenAI, but he claimed the company’s non-profit open source ethos had been corrupted.
PageGroup says people reluctant to change jobs
FTSE 250 recruitment PageGroup is being forced to cut staff after demand wavered and candidates became increasingly reluctant to change jobs. Temporary recruitment had outperformed demand for permanent jobs as clients sought more flexible options, the firm said. PageGroup is best known for its accountancy recruitment, which makes up about 40% of its business. Profit fell by 6.5% in the second quarter. Robert Walters also saw revenues shrink in Q2 amid dwindling confidence.
UK estate agent Winkworth warns on profits as housing market cools
Winkworth is suffering a slump in sales leading the estate agent to warn that profits for this year will come in below market expectations. The alert sent shares down 15%.
Rising rates will destroy PM’s debt-cutting targets
The Office for Budget Responsibility will today report on the effect rising interest rates are having on the public finances. Stubbornly high inflation and soaring borrowing costs will make it more difficult for Rishi Sunak to fulfil his pledge to drive down Britain’s debt. At the budget in March, the OBR forecast that a one percentage point rise in interest rates would add about £20bn to borrowing in 2027-28, the key year for meeting the Chancellor’s target of getting debt falling as a percentage of GDP within five years’ time. It based its forecast on the Bank’s base rate peaking at 4.3%, and had closed its forecasting round when the yield – or interest rate – on 10-year UK government debt was 3.3%. Since then the Bank has increased rates to 5%, with financial markets anticipating further increases to a peak of 6.3% early next year. The yield on 10-year UK gilts has risen to 4.6%. Analysts at Deutsche Bank said the hit to the public purse from higher rates would be about £15bn a year. Bank of America said the figure could be as high as £30bn.
Corporate debt swells to £6tn
The latest annual Janus Henderson Corporate Debt Index reveals that global corporates took on some $456bn of net new debt in the financial year to March, pushing the outstanding total pile to a record $7.8tn (£6.03tn). Analysts at the asset manager said although borrowing had surged by 6.8%, the debt is “very well supported, and the global economy has remained remarkably resilient.”
Britons set to be £25,000 poorer by 2040
The chairman of Liz Truss’s Growth Commission, Douglas McWilliams, has claimed Britons will be £25,000 poorer by the 2040s if the stagnant growth rate continues. Speaking at the launch of the new group, McWilliams also said that, compared to people in the US, the average Briton has less than £10,000 to spend as a result of slower growth in recent decades.