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Daily News Roundup: Wednesday, 31st May 2023

Posted: 31st May 2023


Nearly 800 mortgage deals pulled amid rates uncertainty

Analysis by Moneyfacts shows that almost 10% of UK mortgage deals have been taken off the market in the last week. This comes after higher-than-expected inflation figures prompted concern over how much interest rates will increase. The research shows that nearly 800 residential and buy-to-let deals have been pulled. While the number of residential mortgages on the UK market has fallen from 5,385 to 5,012, the number of buy-to-let mortgages has fallen by 405 to 2,343. Moneyfacts also reports that mortgage rates have increased, with the average rate on a two-year fixed deal rising to 5.38%, and the average rate on a five-year fixed now standing at 5.05%. In May last year, two- and five-year fixed rates stood at 3.03% and 3.17% respectively. Rachel Springall, a finance expert at Moneyfacts, said: “Borrowers searching for a new deal may well be concerned about the latest developments in the mortgage market," adding that some lenders have withdrawn selected fixed products, “with some pulling out of the market, at least temporarily.”

Relaxed rules for small banks could be ‘a game-changer’

Officials have proposed new rules for smaller banks, including simplifying disclosure and liquidity rules for domestically focused lenders with less than £15bn in assets. The Prudential Regulation Authority said the new rules seek to address a “complexity problem” in order to promote competition, with small banks facing higher costs than larger rivals through interpreting and implementing financial regulations. Wedlake Bell partner Jake Ghanty says this is "potentially a game-changer for the City in being able to attract and retain start-up banks."


Former bank executive agrees $3m penalty

Carrie Tolstedt, the former head of Wells Fargo’s retail bank, has agreed to pay a $3m penalty to settle US Securities and Exchange Commission fraud charges for misleading investors about sales practices used to inflate a performance metric. Ms Tolstedt was charged for her role in allegedly misleading investors about the success of Wells Fargo's core business. In February 2020, Wells Fargo paid $3bn to settle federal civil and criminal probes in relation to the phony accounts scandal.

Coinbase manager settles insider trading charge

Former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi, have agreed to settle US Securities and Exchange Commission (SEC) charges related to insider trading of crypto asset securities. They have agreed to settle civil charges that they engaged in a scheme to trade in crypto asset securities that would be made available on Coinbase's platform. SEC enforcement director Gurbir Grewal said: “While the technologies at issue in this case may be new, the conduct is not.”


Private funds expect boost from ESG regulations

Research shows that private investment firms in the UK think incoming ESG regulations will boost the sector. The poll saw 59.1% of limited partners (LPs) and 58% of general partners (GPs) say they feel incoming regulations targeting ESG would have a “positive impact.” The Financial Conduct Authority is consulting on bringing in regulations on Sustainability Disclosure Requirements, with plans to introduce labels to help consumers navigate the market of sustainable investment products. Meanwhile, the Green Taxonomy will deliver a tool to provide investors with clarity on which activities are labelled as green. While 63% of LPs expect to become more demanding in terms of ESG reporting they expect from GPs, only 53% of GPs expect the new regulations to bolster their own reporting requirements. It was also found that globally, more than three quarters of LPs and GPs are planning to stop investing in or promoting non-ESG products by the end of 2025. The report notes that a concern for investors in the UK is that the proposed regulations deviate from the EU’s own rules, which can increase costs.

Legal disputes between firms and insurers surge

The number of High Court disputes between companies and their insurers has almost trebled since before the pandemic. A report from Mactavish, a buyer of outsourced insurance, shows that before 2019, the number of claims ending in the High Court was stable at around 30 a year. However, this jumped to 82 in 2022. The report says the increase was driven by claims on business interruption policies relating to the pandemic, with the number of such disputes up by 14% in 2022. Mactavish CEO Bruce Hepburn said: “Many of these disputes should simply not be going to court. When you buy an insurance product you expect to be protected from loss, not exposed to further costs and delay.” The Association of British Insurers insists that the insurance industry is "committed to supporting its customers and paying out all valid claims as quickly and efficiently as possible.”

Ministers urged to accelerate pension dashboard

Michael Summersgill, chief executive of retail investment firm AJ Bell, has called on ministers to push ahead with the roll-out of the pension dashboard, warning that people could lose touch with their savings without greater control and visibility. He said the “stalling” of the pension dashboard initiative has been “disappointing,” arguing that while it is “not a perfect initiative, not by a long stretch,” it is “something that would help.”


The City trails the West End for new offices

The construction of new offices in London's West End is outpacing the City for the first time, with research showing that the volume of space being developed in the Square Mile is close to its lowest level in almost a decade. There were 200,000 sq ft of new offices being built and 300,000 sq ft being refurbished in the City during the six months to March. This is less than half the space being constructed in the West End, which amounted to 1.3m sq ft.


Supermarket inflation hits 9% in May

The rate of price rises at UK supermarkets hit a new high in the year to May, according to the Shop Price Index from the British Retail Consortium (BRC) and NielsenIQ. The inflation rate across all products rose from 8.8% in April to 9% in May. The report shows that while food prices are still rising, the rate of increase dipped from 15.7% in April to 15.4% in May. However, the rise in the price of non-food goods increased from 5.5% in April to 5.8% in May. Helen Dickinson, director general of the BRC, said: “While overall shop price inflation rose slightly in May, households will welcome food inflation beginning to fall.” She added that the slow down in inflation “was largely driven by lower energy and commodity costs starting to filter through to lower prices of some staples including butter, milk, fruit and fish.”

Asda boss criticises plan to cap food prices

Asda chairman Lord Rose has criticised Government plans to impose price caps on supermarkets, saying such a move could be "counterproductive" and warning of "unintended consequences." He said: “Starting to try and manipulate markets or control markets is not going to be effective.” Lord Rose added: “You can’t interfere in the markets, the markets will control themselves. We are a very efficient industry.” Separately, the British Retail Consortium said the proposals, which could see a voluntary cap on the price of staple items such as bread and milk, “will not make a jot of difference to prices” but could hinder efforts to reduce inflation.


Inflation to exceed BoE target for three years - Goldman Sachs

Researchers at Goldman Sachs expect inflation to exceed the Bank of England’s 2% target for at least the next three years. Analysts at the bank believe headline inflation, measured by the consumer price index, will be running at 4.7% at the end of this year and 3.2% by the end of 2024. Goldman has also warned that interest rates could climb above 5%. Sven Jari Stehn, Goldman’s chief European economist, said the Bank’s Monetary Policy Committee is likely to raise interest rates by another 0.25 percentage points in June and August, taking the base rate to 5%, but added that “risks to our terminal rate forecast are skewed to the upside.”


High inflation fails to boost most firms' profits

Soaring inflation failed to boost company profits last year, data from the Office for National Statistics (ONS) shows. Excluding firms involved in oil and gas extraction, the average net rate of return on capital employed by British companies was 9.5% in 2022. This is down from 10% a year earlier and marks the lowest rate since 2011. The ONS report shows that businesses that extract oil and gas from the North Sea reported an average net rate of return of 18.2% in 2022, with this the highest level since 2011. Consumer price inflation peaked at 11.1% in October 2022 and has since fallen slowly, dropping to 8.7% in April.

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