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Daily News Roundup: Wednesday, 30th August 2023

Posted: 30th August 2023

BANKING

Mortgage lending falls in Q2

Figures from UK Finance show that there has been a decline in mortgage lending, with lending for house purchases down 28% year-on-year in Q2. UK Finance said levels of housing market activity “have remained very low by comparison with recent years” in the first half of 2023. The industry body said this was driven by the “significantly greater affordability challenges currently faced by borrowers,” with rising interest rates delivering a hike in the cost of mortgages. The report shows that record numbers of borrowers chose to refinance with their existing providers, with 84% of remortgaging deals internal transfers. This compares to an average of 77% across 2022. UK Finance data also shows that consumers are seeking out better deals for their savings. Deposits in easy access accounts fell by 7% year-on-year, while deposits in notice accounts, which offer higher interest rates, grew by 23%. Household deposits continued to fall following the slight drop in Q1.

FCA urged to protect consumers from bank rate policies

Experts have warned that high street banks and building societies are breaking new consumer protection rules by denying their best savings rates to customers who opt to manage their accounts in branch. Savings providers including NatWest, Virgin Money and Coventry Building Society reserve some of their best interest rates for customers who operate their accounts digitally. In some cases, customers who bank in person are offered rates three times lower than savers who bank online. Analysis shows that NatWest pays 6.17% on its digital regular saver account, compared to 1.75% on the equivalent branch-based account. Gary Rycroft, of law firm Joseph A Jones & Co, has urged the Financial Conduct Authority (FCA) to take action, saying banks favouring online over offline customers “is unfair and a slap in the face of the efforts by the FCA to protect consumers.” Noting that banks must comply with the new Consumer Duty, an FCA spokesman said: “We have requested firms offering the lowest savings rates to prove to us that they are offering their customers fair value.”

HSBC offers 40 year mortgage

'Marathon mortgages' are on the rise as interest rates make it difficult for some buyers to afford traditional mortgage terms. HSBC is introducing a 40-year mortgage to attract customers who may struggle with monthly payments. The longer term will be available for both residential and buy-to-let mortgages.
Smaller lenders have offered 40-year mortgages before, but HSBC's entry into the market may signal a shift towards longer mortgage terms becoming mainstream. The number of first-time buyers opting for 35-year-plus mortgages has risen from 2% in 2005 to 19% in 2023.

INTERNATIONAL

US banking regulator proposes heightened rules for regional banks

A US banking regulator, the Federal Deposit Insurance Corporation (FDIC), is set to propose heightened rules to ensure regional banks can be safely dissolved in times of stress. The FDIC will vote on five separate proposals aimed at ensuring banks with over $100bn in assets are prepared for their own potential failures. The push comes after three larger banks failed earlier this year, forcing regulators to tap billions of dollars from the FDIC's insurance fund to sell off parts of the firms. The FDIC is expected to tell firms to issue more long-term debt and deliver an overhaul to 'living will' rules for banks. The banking industry is pushing back against the proposals, calling them unjustified and economically harmful. Regulators must demonstrate that the proposed changes "are justified by evidence and outweigh the significant costs to our economy," said Rob Nichols, head of the American Bankers Association.

Citigroup fined $2.9m by SEC

Citigroup Global Markets has agreed to pay a $2.9m penalty to the US Securities and Exchange Commission (SEC) after the regulator found that the company violated record-keeping requirements. The SEC accused Citigroup of using an unsubstantiated and unverified method to calculate and record indirect expenses related to its work as an underwriter. Citigroup neither admitted nor denied the findings.

Goldman Sachs bought UK and US companies using Chinese state funds

Goldman Sachs has utilised a fund backed by the Chinese government to purchase several US and UK companies, with seven deals using cash from a $2.5bn private equity partnership fund.

FINANCIAL SERVICES

UK scraps EU share trading rule

As officials look to boost the City’s reputation as an open and competitive global financial centre, the Financial Conduct Authority has scrapped a rule that limited where investors could trade shares. The share trading obligation, inherited from the EU, restricted financial companies regulated in Britain to trading shares on UK-based platforms. Now traders can buy or sell shares off-exchange, or on any UK or overseas-based platform, giving them more choice and increasing their ability to find the best prices.

Fund manager's board set to resign after takeover collapses

The entire board of Swiss fund manager GAM plans to resign after a takeover bid by UK rival Liontrust collapsed amid pressure from rebel investors. The activist group – which includes Rock Investment and wealth manager Bruellan – will propose new board directors at an emergency general meeting in September. Shareholders rejected the Liontrust deal, with just 33.5% voting in favour. The rebel investors say the offer undervalued GAM and did not recognise the value a turnaround could generate for shareholders.

Grayscale wins court battle over bitcoin ETF

The US Securities and Exchange Commission (SEC) has been ordered by a federal appeals court to approve Grayscale Investments' application to create a spot bitcoin exchange-traded fund (ETF). The court ruled that the SEC's denial of Grayscale's proposal was arbitrary and capricious due to its failure to explain the different treatment between bitcoin futures ETFs and spot bitcoin ETFs. This landmark victory for Grayscale could pave the way for the first-ever spot bitcoin ETF. 

Scams impersonating FCA double

The Financial Conduct Authority (FCA) has warned of an increasing number of scammers pretending to be the watchdog, with 7,700 instances logged with the regulator so far this year. This is more than double the total recorded in 2021. The FCA said fraudsters aim to get people to hand over money or sensitive information, such as bank account PINs and passwords. UK Finance data shows that £1.2bn was lost to fraud in the UK in 2022.

LEISURE & HOSPITALITY

Pubs miss out on £22m due to staff shortage

Pubs in the UK recorded a rise in sales over the bank holiday weekend, but a shortage of staff cost them an estimated £22m in missed sales. According to the British Beer and Pub Association (BBPA), about 57m pints were poured, but an additional 5m could have been sold if there were enough workers. A recent survey revealed that 61% of hospitality firms are experiencing staff shortages.

REAL ESTATE

Home sales set to be lowest since 2012

Data from Zoopla shows that the number of home sales over this year is on course to be the lowest annual total for 11 years. The number of housing sale completions in 2023 is set to fall 21% year-on-year to 1m – with this the lowest level since 2012. The study also suggests that annual house price growth will slow to 0.1%. Richard Donnell, executive director at Zoopla, said: “House price growth has slowed rapidly over the last year as demand weakens in the face of higher mortgage rates.”

RETAIL

Shops see price rises slow

Price rises in British shops have slowed to their lowest rate since October, data from the British Retail Consortium (BRC) shows. Prices rose 6.9% in the year to August, down from 8.4% in July. Fresh food inflation, which slowed to 11.6% in August, from 14.3% in July, was the key factor in the slowdown in price growth. Overall food inflation slowed from 13.4% to 11.5%. The BRC said it expects overall food price inflation to continue to fall but warned that the prices of some items could rise slightly as a result of a Russia pulling out of an agreement that allowed the safe passage of grain out of Ukraine. BRC chief executive Helen Dickinson also noted that there are "supply chain risks for retailers to navigate."

ECONOMY

MP calls for rate rise pause

MP John Baron, a member of the Commons Treasury Committee, believes that the Bank of England may be able to stop raising interest rates if inflation continues to slow. He said there is “a risk of overshoot,” adding that the Bank “has had to raise rates much quicker than it should because it’s been so far behind the curve – pauses are now needed to assess impact, given the six to nine months typical time lag in rises affecting the economy.” He added that the Bank’s rate setting committee risks “compounding its original error” by raising rates once again.

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