UK fixed mortgage rates rise
UK fixed-rate mortages costs have jumped to new seven-month highs, adding to the financial pressures on borrowers.
Financial data provider Moneyfacts reports that the average 2-year fixed residential mortgage rate has risen to 6.23%, up from 6.19% on Friday.
That’s the highest since 16 November, when the property market was reeling from the chaos after the mini-budget.
The average 5-year fixed residential mortgage rate has inched up to 5.86%, up from 5.83% on Friday, the highest since the end of November.
These higher rates follow the Bank of England’s increase in interest rates last Thursday, which lifted Bank Rate to a 15-year high of 5%.
The number of residential mortgage products on the markets has risen, though, to 4,483 from 4,444 on Friday.
Analysis released by the Labour party show that homeowners in Britain are paying thousands of pounds more than Europeans for new mortgages, even before last Thursday’s half-a-percentage point rise in UK interest rates.
These figures lay bare the cost of the Tory mortgage penalty.
This Conservative government can’t grip this problem because they are the problem.
Labour’s plan to ease the Tory mortgage penalty offers practical help now.https://t.co/5n29kpkPp6
— Rachel Reeves (@RachelReevesMP) June 26, 2023
Key events
A group of economists polled by Reuters predict UK interest rates will peak at 5.5% this autumn.
The City has revised up its forecasts for future Bank of England action, after the central bank lifted rates from 4.5% to 5% last Thursday.
Economists are now anticipating two quarter-point rises, one in August and another in September, as the BoE sounds more concerned that persistently high inflation in Britain is taking longer to fall than hoped.
But as flagged earlier, the money markets predict rates will hit 6% (that is based on the prices of interest rate swaps – derivatives used to hedge against changes in rates).
Pakistan raises interest rates to 22% at emergency meeting
Over in Pakistan, the central bank has unexpectedly raised interest rates… to 22%, from 21%.
The State Bank of Pakistan’s monetary policy committee convened an energency meeting today, after concluding that the inflation outlook had deteriorated as the country struggled to agree an IMF bailout.
Just a week ago, State Bank of Pakistan said inflation has peaked and there’s no need to raise interest rate further. Irony a special meeting today increased it by 1%
— Irfan Ishaque (@irfanishaque) June 26, 2023
After days of talks with the IMF, Pakistan agreed to change its budget for the next fiscal year, by raising taxes and cutting spending in a bid to cut its fiscal deficit. Restrictions on imports are also being lifted.
The MPC says:
The Committee views that additional tax measures are likely to contribute to inflation both directly and indirectly, while the relaxation in imports may exert pressures in the foreign exchange market.
Post-Brexit import checks ‘risk further pushing up food prices’
Joanna Partridge
The UK’s post-Brexit border strategy risks further pushing up food prices, adding to the cost of living pressures on households.
That’s according to a stark warning from representatives of Britain’s fresh produce industry, my colleague Joanna Partridge reports.
Traders in the food supply chain are warning they will not be able to absorb the extra cost of charges levied for import checks on goods entering the country from the EU and the rest of the world, due to be introduced in the new year.
Estimated additional annual costs of more than £10m, stemming from import charges, would have to be passed on to consumers, fuelling food inflation, just as prices are thought to have peaked.
Industry body the Fresh Produce Consortium (FPC) – which claims to speak for 70% of the UK’s fresh produce supply chain, including businesses that produce, package, move and sell fresh fruit, vegetables, cut flowers and plants – has written to ministers to share its members’ concerns about the UK’s post-Brexit border strategy.
In a highly critical submission to the government, the FPC accused ministers of adopting “an outdated and highly inefficient border solution which fails to meet the needs of a modern progressive industry and simply adds cost for consumers”.
Back in the City, Lingotto Investment Management – a fund chaired by former UK chancellor George Osborne – has increased its stake in online supermarket and robotics company Ocado to above 5%.
Lingotto, which is owned by Italian family Agnelli’s holding company, has disclosed the position in a regulatory filing today, showing it crossed the threshold on Friday.
Last Thursday, shares in Ocaco jumped 40% amid speculation that the company could be a takeover target for Amazon:
Savings rates rise
Moneyfacts have also reported that savings rates, like mortages rates, have risen today.
Based on savers with £10,000 to invest, they say:
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The average 1-year fixed savings rate today is 4.61%. This is up from an average rate of 4.55% on the previous working day.
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The average easy access savings rate today is 2.36%. This is up from an average rate of 2.35% on the previous working day.
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The average 1-year fixed Cash ISA rate today is 4.31%. This is up from an average rate of 4.26% on the previous working day.
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The average easy access ISA rate today is 2.47%. This is the same average rate as the previous working day.
UK banks have been under growing pressure to pass on interest rates increases to savers, with MPs concerned that this has not kept pace with rising rates for borrowers.
What To Do If Your Mortgage Deal Is Withdrawn
Brian Murphy, head of lending at Mortgage Advice Bureau, has sent over some advice for borrowers worried that mortgage deals are being withdrawn, and repriced higher.
1) Don’t panic
Whether you’re a first-time buyer or remortgaging, the mortgage market can be daunting. With the recent disappearance of mortgage products making homeowners and first-time buyers feel anxious, it’s important not to panic. Instead, at the beginning of your mortgage journey, make sure to set time aside to thoroughly research the products still available, and which of these meet your needs and criteria. If you’re midway through the application process, regardless of the changes a lender may make, it’s likely they’ll honour the interest rate you’ve agreed to for six months.
2) Speak to a mortgage adviser
An adviser can help you to navigate the mortgage market, supporting you throughout the process right up until you seal the deal. Finding the right mortgage offer for you can be both confusing and overwhelming, particularly with all the different terms and jargon. Knowing the industry inside out, a mortgage adviser’s job is to use their knowledge to help you find and secure a deal that suits your circumstances. Whilst we’re seeing deals being pulled, there are still plenty available. What’s more, mortgage advisers often have exclusive access to additional deals.
3) Get ready early
There are many steps with the mortgage application process, and it’s easy to feel bogged down in paperwork. Although this might seem boring, it’s crucial to have everything ready to go, along with a clear understanding at all times of where you stand within the process. A mortgage rate is considered ‘locked in’ once an offer has been made by the lender, and that ‘Decision in Principle’ can last up to six months. However, if you’re still sifting through the paperwork and are yet to submit your mortgage application, the sudden removal of your deal by the lender is a possibility.
4) Shop around for the right deal
Although we’re seeing some products being pulled from the market, there are others available. With higher interest rates, it’s important that first-time buyers and current homeowners who are looking to remortgage shop around. A mortgage adviser can help you find the most suitable deal for your circumstances and factor in true costs. It’s also important to not only think about headline rates, but also assess any additional fees that may be involved. Our online mortgage finder can also help you to quickly and easily find available deals, filtering offers based on your circumstances (for example, the value of your property).
5 Remember there’s always a plan B
If you find yourself in the stressful situation whereby your mortgage product has been withdrawn, or is about to be, it’s time to take a step back and review your options. In some cases, mortgage advisers will be notified a few hours before a deal is pulled off the market, giving you a small window of opportunity to get your application over the finish line. Whilst this isn’t always the case nor possible, it’s worth checki
The money markets are still predicing that UK interst rates will hit 6% by the end of this year, up from 5% at present.
Currently, the markets estimate there is a roughly 50:50 chance that the Bank of England delivers another large interest rate rise at its next meeting, in August, taking base rate up to 5.5%.
Rupert Thompson, chief economist at Kingswood, explains:
Almost certainly, the MPC will raise rates again in August. The only question is whether it is by 0.25% or 0.5% which will depend on the wage and inflation numbers released in the meantime. As to where rates peak, the market is now pricing in them reaching as high as 6%.
Once again, this looks on the high side but this is said with some humility. The market has recently been rather more accurate on the path for UK rates than most economists, particularly those at the Bank of England.
The Unite union are urging chancellor Jeremy Hunt to tackle Britain’s “profiteering crisis” when he meets the heads of the energy, water and telecoms regulators on Wednesday.
Unite general secretary, Sharon Graham said:
“Here we have a tacit acknowledgment from the chancellor that Britain is in the grip of a profiteering crisis. But to be honest, we need to go way beyond talking shops with regulators before we can be convinced the chancellor is serious about tackling Britain’s epidemic of profiteering.
“Tinkering at the edges is just not enough. Unite’s own research has shown that if domestic energy had been in public ownership at the time the crisis hit we could have saved every household £1,800 and cut inflation by 4%. Tinkering at the edges, and talking shops about the crisis are just not enough.”
UK retailers have denied accusations of ‘greedflation’ – the practice where firms take advantage of high inflation to ramp up their prices higher than is justified by rising costs.
But, as Primark showed this morning, many companies have been able to maintain or increase profits through price increases.
Mark Sweney
Back in the City, shares in luxury carmaker Aston Martin have jumped almost 10% after it struck a deal with the US firm Lucid to start making “ultra-luxury high-performance electric vehicles” from 2025.
The British luxury carmaker, whose losses more than doubled last year to almost £500m, has struck a cash and shares deal valued at £182m in which Lucid will take a 3.7% stake in London-listed Aston Martin.
The carmaker, which sold 6,400 luxury vehicles last year and has spent heavily on new models, said it would select powertrain components from Lucid for initial and certain future battery electric vehicle (BEV) models.
The company said the deal, which involves a minimum spend of £177m with Lucid, would help drive its plan to launch its first BEV in 2025.
Roberto Fedeli, Aston Martin’s chief technology officer, said:
“Combined with our internal development, this [deal with Lucid] will allow us to create a single bespoke BEV platform suitable for all future Aston Martin products, all the way from hypercars to sports cars and SUVs.”
Back in Germany, central bankers are hopeful that the country’s recession will end in the current quarter.
The Bundesbank, in its latest monthly report, predicts that gross domestic product will “rise slightly” in the April to June period, after contracting in October-December and January-March.
The Bundesbank says:
“Private consumption should bottom out.
Thanks to strongly rising wages, the real disposable incomes of private households are stabilising despite inflation remaining very high.”
It also predicts that Germany’s industry will withstand the decline in demand, adding:
Fallen energy prices are having something of an easing effect, the order books are still very well stocked, and supply bottlenecks are likely to continue diminishing.
However, this morning’s IFO survey of German business confidence suggested the recession could linger…
And for 2023 as a whole, the Bundesbank forecasts Germany’s economy will shrink by 0.3%, followed by a small recovery of 1.2% in 2024 and by 1.3% in 2025.
UK retail sales falter again, reports CBI
Just in: sales volumes at UK retailers have fallen for the second month running, a new survey shows.
The latest ‘distributive trades’ survey from the CBI lobby group shows that “difficult trading conditions” persist in the sector this month, despite Primark’s owner lifting its profit forecast this morning.
The poll found that more retailers reported a drop in sales volumes, rather than a rise, and that orders have also dropped. With sales weak, inventories have swelled.
The CBI says:
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Retail sales volumes continued to decline in the year to June (weighted balance of -9% from -10% in the year to May) but are expected to be unchanged next month (0%).
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Orders placed upon suppliers declined in the year to June, but at a slower pace than last month (-10% from -30% in May). Orders are expected to fall at a broadly similar pace next month (-9%).
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Retailers reported the firmest stock positions since May 2020 (+33% from +25% in May). Stock volumes look set to remain elevated relative to expected sales next month (+26%).
