Mortgage rates rise sharply
Leading mortgage lenders are increasing the cost of home loans, with data from financial information service Moneyfacts showing that the average two-year fixed rate is now close to 6%. A typical two-year fixed mortgage deal is currently 5.75%, up from 4.74% on the day of the mini-Budget. In December, the average two-year fixed deal was 2.34%. Rates have risen as interest rates have increased and the recent slump in the pound has driven fears of steeper interest rates, prompting lenders to reprice deals. In recent days, major lenders such as Barclays, Skipton Building Society, NatWest, Virgin Money and Nationwide have increased their rates. Ray Boulger of broker John Charcol said the best fixed-rate deal over two years with a 40% deposit yesterday was the 4.56% offering from Halifax, compared to a best rate of 3.57% from Skipton three weeks ago. Lenders have also withdrawn hundreds of products in the last week. Moneyfacts said that there were 3,961 deals available on the morning of the mini-Budget, compared with 2,262 at the start of this week - a 43% fall. Aaron Strutt of Trinity Financial comments: "The normal rules of lending have changed."
Credit Suisse shares slip
Credit Suisse shares have fallen to a record low as markets grow increasingly concerned that the Swiss investment bank is on the brink of collapse. The bank, which has moved to reassure investors of its capital and liquidity position, saw shares slip 12% to a historic low of 3.518 Swiss francs on Monday - although they had rebounded slightly by the end of the session. Stock in the bank is already down 60% over the past 12 months following a number of scandals, and shares have lost 70% of their value since March 2021. Meanwhile, the price of Credit Suisse’s credit default swaps– financial instruments bought by investors which effectively act as insurance if a company reneges on its debts – soared by more than 100 basis points yesterday. Analysts at JPMorgan have told clients that Credit Suisse is in a “healthy” position, citing its 13.5% common equity tier one ratio, which is an important measure of a bank’s financial strength.
More than half a million uninsured cars taken off Britain's roads
Almost 550,000 uninsured cars have been seized by police since 2018, as new figures shine a light on the number of motors being used on Britain’s roads without cover. Already this year, some 64,682 uninsured cars have been confiscated, an investigation by AA Insurance has found.
FCA plans financial resilience return
The Financial Conduct Authority (FCA) plans to introduce a new financial resilience return. The FIN073 - Baseline Financial Resilience Report would replace the existing ad hoc survey, which is estimated to have an ongoing cost of £2.5m to firms. In a consultation paper, the FCA said firms will be required to submit data every quarter. They will pay a predicted one-off cost totalling £14.9m. The FCA estimates the total cost of familiarisation will be around £1,014 for medium firms, and around £216 for small firms. Since June 2020, the FCA has issued a financial resilience survey to collect basic financial data from approximately 23,000 legal entities. The City watchdog said the current approach of collecting the data through ad hoc surveys places significant administrative burden on firms so is proposing to rationalise and standardise this data collection in the form of a regulatory return.
BlackRock reshapes top team to boost firepower against critics
Asset manager BlackRock has announced that Martin Small will replace Gary Shedlin as chief financial officer, saying it “regularly evolves our management team to grow leaders in new roles.”
Manufacturing sector shrinks again
Manufacturing output contracted for a third month in a row in September, taking a hit from falling exports and uncertainty about whether the economy is on the brink of recession, according to the S&P Global/CIPS UK Manufacturing PMI. The index rose to 48.4 from August’s 27-month low of 47.3. Despite the climb, it remained below 50 — the level that divides growth from contraction. The report said manufacturers “faced weak global market conditions, rising uncertainty, high transportation costs reducing competitiveness and longer lead times leading to cancelled orders.” New export orders fell at the quickest pace since May 2020, while input cost inflation rose for the first time in five months. Rob Dobson, director at S&P Global Market Intelligence, said “existing headwinds” are likely to be exacerbated by volatility in financial markets, growing economic uncertainty and increases in borrowing rates. “The industrial sector is likely to remain in the doldrums during the coming quarter to add to deepening recession risks,” he added.
MEDIA & ENTERTAINMENT
Vodafone and Three in merger talks
Vodafone is in talks with Three about merging their UK businesses in a deal that could see the third and fourth largest mobile phone networks create a business with 27m customers. Reports suggest the two companies are hopeful of striking a deal by the end of the year, with it noted that any deal would be scrutinised by the Competition and Markets Authority. Vodafone said it would own 51% and Hutchison, which operates Three, would hold 49% of the combined entity.
Stamp duty cuts could increase property values by £34k
Average house prices across the UK could increase by a further £34,000 over the next 12 months, according to market analysis by specialist property lending experts Octane Capital. The experts believe the price hike will be spurred by cuts to stamp duty announced by Chancellor Kwasi Kwarteng. The research looked at the average monthly rate of house price growth following the initial stamp duty holiday in 2020/2021 and what a similar rate of growth could mean for the market over the next 12 months. The figures revealed that during the stamp duty holiday, the average house price across England climbed at a rate of 0.9% each month. House prices increased from £253,226 when the holiday began, to £287,370 when the holiday came to an end in September 2021.
Government U-turns on plans to scrap top tax rate
The Government has U-turned on controversial plans to scrap the 45p rate of income tax for higher earners, with Chancellor Kwasi Kwarteng saying: “We listened to people, I get it.” Saying that the proposals announced as part of his mini-Budget had become "a massive distraction," he told BBC Breakfast the proposal was "drowning out a strong package", including support for energy bills, and cuts to the basic rate of income tax and corporation tax. Asked whether his previous comment that there was "more to come" on tax cuts still stood, Mr Kwarteng said there would be no tax cuts ahead of the next Budget in the spring. Plans to scrap the top rate of tax had drawn opposition from the markets, other parties and several Conservative MPs. Following news of the U-turn, former Cabinet minister Michael Gove said he will now back the Government's mini-Budget in its current form. He said debate over the 45p tax increase "obscured" the fact "there were lots of good things ... and some potentially interesting things" in the plans set out by the Prime Minister and Chancellor.
Chancellor to set out debt plan earlier than planned
The Chancellor will set out his plan to get UK debt falling earlier than planned, with Kwasi Kwarteng expected to publish details on how the cuts will be paid for later this month, having previously said he would wait until November 23. He told the Conservative party conference his medium-term fiscal plan will come "shortly," saying he wanted to "move forward" with no "distractions." The Office for Budget Responsibility (OBR) will cost all the policies announced by the Chancellor and publish forecasts for economic growth. Mel Stride, chairman of the Treasury Committee, said he had "pressed the Chancellor very hard on this and to his credit he has listened," adding that bringing the OBR forecast forward should "should calm markets more quickly and reduce the upward pressure on interest rates."
UN: High interest rates may push economies into recession
The UN has called on central banks not to increase interest rates and depart from the monetary policy being pursued by a large number of regulators, saying tightening policy and hiking interest rates could deliver recessions. The United Nations Conference on Trade and Development has expressed "worries that an unduly rapid tightening of monetary policy in advanced economies in combination with inadequate multilateral support could turn a slowdown in to recession.” Its Trade and Development Report 2022 adds that this would trigger "vicious economic circles in the developing world with the damage more lasting than after the global financial crisis or Covid shock."