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Daily News Roundup: Wednesday, 16th November 2022

Posted: 16th November 2022

BANKING

Mortgage rates could fall below 4% in 2023

Rates on fixed mortgage deals are expected to fall below 4% as soon as next year, with several lenders having already started to reduce their rates. These banks have opted to pull back on loan rates having seen the cost of financing reduce, with the gilt crisis easing and confidence in the economy increasing. While the Bank of England has increased the base rate by 0.75 percentage points to 3%, many lenders had priced in a steeper hike in the wake of the controversial mini-Budget. Markets are expecting the Bank to raise the central rate to a peak of 4.5% next year, far below previous forecasts of around 6%. The average two-year fix, which peaked at 6.65% on October 20 now sits at 6.28%, while the average five-year deal, which peaked at 6.51%, is currently 6.07%, according to Moneyfacts. Platform, Yorkshire Building Society, HSBC, Halifax, Lloyds and NatWest have all reduced their fixed rates in the last week. First Direct is offering a 4.99% ten-year fix, while Nationwide has a two-year fix at 4.84% and a five-year fix at 4.64% available to its existing borrowers. Mark Harris, chief executive of mortgage broker SPF Private Clients, said that the pricing of fixed-rate deals had been “edging down” in recent weeks,  adding: “If this continues, we would expect five-year fixes below 4% by early 2023.”

Scottish Widows names new CEO

Lloyds Banking Group has appointed HSBC's head of strategy, Chirantan Barua, as the chief executive officer of Scottish Widows and its wider insurance, pensions and investments business. Noel Quinn, HSBC chief executive, said: “Chira has added significant value during his time at HSBC. This is a great opportunity for him, we support him and wish him the best of luck.”

FINANCIAL SERVICES

FCA urges political support for crypto bans

The Financial Conduct Authority (FCA) has urged lawmakers to support its decision not to grant licences to a number of crypto exchanges. FCA chief executive Nikhil Rathi told a House of Lords select committee: “We have taken quite a bit of heat from people saying we are allowing this innovative activity to move to other jurisdictions, and that other jurisdictions are stealing a march," before insisting that he stood by decisions to ban such platforms. He added that he believes the watchdog requires “parliamentary support and political support” when it makes these “robust decisions.” Analysis shows that 85% of licence applications from crypto trading firms have either been rejected or withdrawn. While cryptoassets are unregulated in Britain, the Financial Services and Markets Bill is expected to deliver regulation over the marketing of cryptoassets, giving the FCA powers to protect consumers. Meanwhile, a group of crypto executives have called for more regulation, saying the collapse of cryptocurrency exchange FTX may not have happened if the industry was properly regulated. Ian Taylor, executive director at trade body CryptoUK, told the Treasury committee: "If we had had some regulation, some of these recent events may not have taken place." Katie Prescott in the Times says regulation of crypto “feels both necessary and inevitable,” suggesting that it is “now up to the Treasury to give powers to the regulators to deal with what should be the basics: governance, transparency and record-keeping.”

Rathi calls for crackdown on shadow banking firms

Shadow banking firms should draw up contingency plans so that they can be safely wound down if they collapse, according to Financial Conduct Authority chief executive Nikhil Rathi. While Britain’s biggest banks are required to devise plans to show how they could be allowed to fail without the need for a taxpayer bailout, Mr Rathi has told a Lords committee that such “testing for failure” could be extended to other financial firms. Warning that “work needs to be done in the non-bank space, he said: “In the banking sector we have a stress test but then we have a resolution regime, so we require detailed planning for if you blow through the stress test, how would the system cope and how would you fail.”

Randell: Financial services bill ‘threatens independence of regulators’

Former Financial Conduct Authority (FCA) chairman Charles Randell has voiced concern over plans to give ministers the power to override regulators’ decisions, saying the Government “should leave the independent institutions which deliver financial regulation to do their job.” This comes with the Financial Services and Markets Bill proposing a “public interest intervention power” which would allow ministers to direct regulators to make, change or revoke rules. Mr Randell said the proposal suggests “ministers should be delegated power by parliament to step in when they do not like rules that a regulator is about to make, and instead impose rules of their own choosing,” adding that while no details have been set out, “it is unlikely that there would be much democratic accountability.”

Watchdog was 'not prepared' for pensions chaos

Financial Conduct Authority (FCA) chief executive Nikhil Rathi has admitted that the City watchdog was not prepared for the risk posed to pension funds by the rise in UK bond yields that came in the wake of the mini-Budget. He told a House of Lords select committee that the threat had not been “right at the top of the radar.” Noting that the scale of a surge in yields on UK bonds “has just never happened at any major time in our history,” he said that this particular risk had not been tested for.

Ninety One haemorrhages £3.2bn

Ninety One investors pulled £3.2bn from the asset manager's funds in the first half of the year. Its assets under management at the end of September were £132.3bn. This was down 8% compared to the previous six months, with this reflecting net outflows and negative markets. Net outflows of £3.2bn compare to net inflows of £5bn in the previous six months and of £3.9bn in the first half of 2021. Pre-tax profit fell 16% to £110.6m. Several UK fund managers, including Quilter, Rathbones and Liontrust Asset Management, have reported falling assets under management in the most recent quarter.

Envestnet faces proxy investor fight

Activist investor Impactive Capital is reportedly planning to ask for board seats to push financial technology company Envestnet to improve its stock price by cutting costs and overhauling pay. Sources say that Impactive, which holds a 7.2% stake in Envestnet, is preparing for a proxy fight after private negotiations broke down.

MEDIA & ENTERTAINMENT

Investor tells Alphabet to reduce headcount

TCI Fund Management, an investor with a $6bn stake in Google's parent company Alphabet, has urged the tech giant to cut costs by slashing its headcount, warning that it has “too many employees and cost per employee is too high.” In an open letter to Alphabet CEO Sundar Pichai, TCI managing director Christopher Horn said “management needs to take aggressive action' to reduce costs."

RETAIL

Brits start Christmas shopping early

Retail analysts have said that Britons are Christmas shopping early this year as they navigate a worsening cost of living squeeze by budgeting what they spend. According to new research, 30% of shoppers will have started their Christmas shopping this year before mid-October compared to 18% last year. Separate research has found that Asda, Co-op and Iceland were the fastest growing big stores last month, with sales growth of 7.6%, 7.1% and 6.4% respectively.

ECONOMY

Real terms wages slip by 2.7%

Regular pay rose by 5.7% in the year to September, according to Office for National Statistics (ONS) figures. However, when adjusted for inflation, wages fell by 2.7%. The report shows private sector pay growth of 6.6% in the period, compared to 2.2% in the public sector. The Resolution Foundation think-tank said this gap is "unsustainable" as it made it harder to recruit and retain public sector staff. The report also shows that pay excluding bonuses dropped 2.7% in Q3. Commenting on the latest figures, Chancellor Jeremy Hunt, who will reportedly announce a significant rise in the national living wage in his Autumn Statement, said he understood that "people's hard-earned money isn't going as far as it should." He added: “Tackling inflation is my absolute priority,” saying that this “guides the difficult decisions on tax and spending” the Government will make when setting out the Budget.

Unemployment increases in Q3

Office for National Statistics (ONS) data shows that the rate of UK unemployment rose to 3.6% in Q3, with this up from 3.5% in the second quarter. This came as more people dropped out of the workforce, with a rise in the proportion of people not in work or seeking employment. The ONS also noted that more than half a million working days were lost to strikes in August and September. This marks the highest two-month total in more than a decade.

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