Archive - Market Intelligence
Sources are acknowledged.
Time to clean up the London laundromat
The FT calls for a crackdown on money laundering, arguing that UK authorities have for too long been reluctant to adopt or enforce tougher safeguards against dirty money.
RBS' digital bank to be called Bo
Royal Bank of Scotland is looking to launch a standalone digital-only bank called Bo, with it believed that it will be pitched as a rival to challenger banks such as Monzo, Revolut and Starling Bank. It is expected to launch in 2019, with the aim of migrating 1m NatWest customers to the mobile platform. Bo, which will be overseen by former RBS COO Mark Bailie, is expected to utilise artificial intelligence to help customers manage their financial affairs.
The Daily Telegraph
Scottish specialist lending market predicted to double in 2019
The Scottish specialist lending market is set to double in size next year due to the influx of new lenders with much improved criteria, product choice and rates, predicts Your Expert Group. The Glasgow-based specialist finance broker said that, due to a saturated specialist lending sector in England, challenger banks and alternative finance providers were looking at new markets; it added that, in the fourth quarter alone, four new complex residential and BTL challenger lenders are due to open their doors to Scottish brokers and borrowers.
Bridging and Commercial
Funding Circle reduces IPO price range
Peer-to-peer lender Funding Circle has narrowed the price range of its IPO to 440p-460p, from an initial 420p-530p, due to a lower level of interest in the offering than initially anticipated. Funding Circle is looking to raise around £300m when it lists on the main market of the London Stock Exchange next month.
P2P Finance News
May claims crackdown threat on ‘dirty money’ is paying off
Theresa May says unexplained-wealth orders are already deterring potential criminals from using the UK as a haven for dirty money. The prime minister said the threat posed by the legislation “has actually meant some people have changed their behaviour and are now playing by the rules.”
RBS boss expects smaller banks to lose out to big lenders
RBS chief executive Ross McEwan predicts Britain’s challenger banks will struggle to compete against the resurgent big six lenders. Mr McEwan said small lenders would come under pressure as larger rivals such as RBS picked up speed after a decade of hefty restructuring and misconduct costs. His comments come as challenger banks prepare to be briefed on Thursday on the details of a contest for £833m of funding, provided by RBS, designed to boost competition in business banking.
The Daily Telegraph
Frankfurt winning Brexit bank moves
Frankfurt has attracted jobs from Barclays, Lloyds Banking Group, Citigroup and Morgan Stanley, among others, winning the race to attract the banking jobs leaving London because of Brexit, according to a fresh survey by German-headquartered bank Helaba. Paris has gained from Bank of America, Goldman Sachs and HSBC.
Eyes focus on peer-to-peer lenders
The Sunday Times reports that restructuring specialists are looking at the peer-to-peer lending sector for signs of weakness, as speculation mounts about the sector will cope when the next recession hits. Figures from AltFi show that the platforms will lend more than £7.5bn to consumers and small firms this year – with 75% coming from the three biggest operators in the sector: Funding Circle, RateSetter and Zopa. Experts said they are worried that heavy losses at one platform could spread across the industry and drain confidence.
The Sunday Times
Experts warn on Bitcoin risks
Experts have warned that Bitcoin-using millennials could be harmed throughout their investing lives by developing dangerous savings habits. Patrick Connolly of financial adviser Chase de Vere commented: "It is almost impossible for investors to understand the mechanics behind crypto investments and there is no protection in place if it all goes wrong".
The Daily Telegraph
Thousands of bank branches closed in four years
Research from consumer group Which? has revealed that nearly 3,000 high street bank and building society branches have shut since 2014. Jenni Allen, managing director of Which? Money, commented: "The rate at which free-to-use cashpoints are closing is alarming. Plastic cards may have overtaken cash as the most commonly used payment method but 2.7m British adults rely almost wholly on cash.” George McNamara, director of policy at charity Independent Age, noted: "With increasingly large distances between bank branches, this can cause difficulties for customers who rely on public transport. Banks must ensure that all customers can access services, advice and offers using their preferred method of communication, whether that be over the internet, on the phone or in person."
Banks approve 80% of SME finance applications
UK Finance’s SME update for Q2 2018 reveals banks approved eight out of 10 applications for SME finance during Q2 2018. The figures show that 69,300 of new SME loans were approved by banks for a value of £7.1bn - a far higher figure than the £15m that the bank referral scheme has provided to SMEs since it launched almost two years ago. However, despite the 80% approval rate by banks in Q2, Colin Goldstein, head of strategic partnerships at iwoca, said securing credit remained one of the biggest challenges for a growing small business. He added: “Making access to capital seamless and hassle free, relieving owners of the burden of extra financial paperwork and eliminating wasted time will see SMEs regain their confidence.”
Bridging and Commercial
Mass bank closures are unacceptable
Age Scotland has said that mass bank closures are “unacceptable” for older people and innovative solutions like shared banking should be introduced. Following a bank closure debate at Holyrood, Age Scotland called on banks to introduce measures to alleviate the loss of local branches. Brian Sloan, Age Scotland’s CEO, said: “Physical branches are important to older people. They prefer having a face-to-face conversation about their finances with a real person.” Meanwhile, the cross-party Scottish Affairs Committee has accused the UK Government of “burying its head in the sand” after refusing to use its majority stake in RBS to halt the branch closures programme.
France seeking to lure UK fintech jobs
Delphine Gény-Stephann, the French junior economy and finance minister, has launched a new government-backed tech incubator to lure thousands of UK financial technology jobs to France. The incubator offers companies support with funding and strategies, and also offers foreign companies “relocation packages”.
The Daily Telegraph
A third of small businesses unsure how to get finance
A poll by the British Business Bank reveals that a third of British small business owners would like to expand but do not know how to go about securing finance. Only 5% considered bringing in a business angel and 7% thought about crowdfunding. Over half those surveyed said they expect their business to grow over the next 12 months. A separate survey for Hitachi's financing arm found two-thirds of small businesses plan to expand in the next three years.
Rics calls for property tax overhaul
The Royal Institution of Chartered Surveyors (Rics) has argued a housing tax overhaul, including ending stamp duty on certain properties, could rebalance the market and "reignite activity". It said the Government should look at what changes are needed to create a more vibrant property sector with a full-scale review of the stamp duty system.
House prices will not crash after Brexit
Geoffrey Yu, head of UK investment for UBS Wealth Management, has said that he does not expect house prices to collapse following Britain’s exit from the EU, despite warnings from Mark Carney that they could plummet by as much as 35% if there is a “disorderly” Brexit. Mr Yu said that UBS expected a Brexit deal to be struck between the UK and the European bloc, meaning house prices will remain stable.
Mortgage rates largely static
Mortgage rates have remained largely static since the Bank of England raised the base rate from 0.5% to 0.75%, according to information website Moneyfacts, with two-year fixes dropping to an average 2.51% from 2.52% the day after the decision in August. The difference for two-year fixes, between September 2017 and September this year, is only around 0.31 percentage points - from 2.20 to 2.51% respectively. Meanwhile, the proportion of savings accounts on the market paying above the Bank of England base rate has sunk to a five-year low, analysis has found. Just over two-thirds of savings accounts pay a rate above 0.75 per cent, Moneyfacts found.
Lenders lure BTL investors
The proportion of homes sold to landlords has reached the lowest level since January 2010, according to Hamptons International. In August 9.9% of sold homes were bought by landlords, compared with an average of 17.6% in the year until April 2016, when a stamp duty surcharge on the purchase of additional homes was introduced. Landlords are now being offered more attractive deals on BTL mortgages, and there are also a record number of mortgages for first-time landlords.
Lloyds closes more branches
Lloyds Banking Group is to close a further 15 branches as it presses ahead with plans to streamline the business. A Lloyds spokesman said: “These branch closures are in response to changing customer behaviour and the reduced number of transactions being made in branches. All branches announced for closure have a Post Office less than half a mile away, so customers can still access their banking locally.”
The Daily Telegraph
Free ATMs closing at record rate
Cash machine network co-ordinator Link has provided figures showing that more than 250 free-to-use ATMs are disappearing a month as operators shut unprofitable ones. There are around 53,000 free machines in the UK - but the number is shrinking at a record rate as people use less cash. The Payment Systems Regulator is cracking down on the closures and asking for more network protection. Managing director Hannah Nixon said: “The requirements we intend to place on Link will help ensure that Link achieves their commitment to protecting the geographic spread of free-to-use ATMs across the UK.”
Remortgaging surged in July
Remortgaging spiked to its highest level in more than a decade in July, according to data from UK Finance, with around 46,900 new homeowner remortgages completed - up 23.1% compared with the same month last year. Total remortgaging deals worth £8.7bn were completed in the month. First-time buyer mortgages completed in July edged up 1%, to 31,400, with the average loan standing at £145,000. Around 14,700 new buy-to-let remortgages were completed in the month, marking a 7.3% increase on July 2017.
Views on valuation documentation
Development Finance Today has asked specialist finance brokers whether lenders should have the authority to withhold valuation documentation. Robert Collins, director at Sirius Property Finance, said “It benefits all parties if information like this can be shared more openly [so that] everyone is aware of the true situation.” Elsewhere, Stephen Burns at Adapt Finance, said: “We expect the lender to release the valuation to our client in every case”. John Kerrigan, director of the structured finance team at Arc & Co, added that lenders tended to hold on to valuation reports for control and to avoid external influence. However, Joe Arnold, managing director at Arnold & Baldwin, believed that it was important to remember that a valuation report was undertaken by a lender for their protection and so it was up to that lender to choose whether or not to disclose the information.
Development Finance Today
SMEs still struggle to find finance
The Sunday Times says companies looking for finance are still struggling to secure loans, despite big banks insisting they are committed to lending to small businesses. Figures from UK Finance show the outstanding balance of loans and overdrafts to small businesses by major lenders fell by 6.9% to £87.2bn across the country between the final quarters of 2015 and 2017, with small business lending in parts of Yorkshire falling by 27.5% in just two years.
The Sunday Times
Can banking minnows grow fast enough?
Rosamund Urwin examines Britain’s challenger banks in the Sunday Times, and asks whether new entrants to the sector will ever be able to take on the big four banks. She says for truly new entrants such as Metro, Starling and Monzo, the biggest problem is growth. She adds that the path to profitability is also slow, but notes that one thing in the challenger banks favour is technology. Ms Urwin ends by saying that there is a further spectre on the horizon: the possibility that tech titans such as Amazon will venture into banking. In a separate article, Ms Urwin profiles Goldman Sachs’ new bank Marcus. The retail bank will formally open to the British public this month after a soft launch for staff.
The Sunday Times
UK venture capital turns its attention towards tech
The Telegraph looks at the reasons why UK venture capital companies have upped their investments in the UK tech scene. In the three months to the end of June, around £1.6bn was invested in UK businesses, across 244 deals, and the region accounted for six of the 10 top European deals done. David Mott, chair of the British Private Equity and Venture Capital Association notes that the gap between the UK and the US is also starting to close.
The Daily Telegraph
UK Finance: Asset-based lending rises in UK
New figures from UK Finance reveal that lending against assets other than invoices during the second quarter amounted to £4.3bn, a 5.6% year-on-year increase. Invoice finance, where advances are made against debt, fell to £17bn, compared to £17.7bn a year earlier, with total advances to all client businesses supported by invoice finance and asset-based lending standing at £21.4bn, a 1.9% decrease. The total number of finance clients rose 1.1% to 40,333, while the number of clients with a turnover of more than £10 million increased to over 5,000, up 7% on 2017.
Asset Finance International
Debt crisis grows
A report by the National Audit Office reveals that a fifth of UK adults have less than £100 in savings, raising concerns that the country's savings culture has been eroded by a decade of ultra-low interest rates. Baroness Ros Altmann, a former pensions minister, stated: “Having little or no savings may force people into the hands of loan sharks or high cost emergency loans, and that can lead to a negative spiral of debt.”
RBS to halve number of England and Wales branches
Royal Bank of Scotland is to cut its English and Welsh branch network in half in January, resulting in the loss of over 250 jobs. Following the restructuring, required after RBS failed to sell its Williams & Glyn brand, NatWest will have 651 branches in England and Wales, plus five in Scotland, while there will be 99 RBS branches in Scotland and 54 in England, including six in London and the south east. Claire Reading, Development Manager at the Federation of Small Business, said the losses would further hurt small businesses which value bank branch access. “Demand for new finance among small firms is already low, hampering their expansion and wider economic growth. A diminished branch network could well make a bad situation worse.”
The Daily Telegraph
TSB boss steps down over IT chaos
TSB chief executive Paul Pester is stepping down in the wake of the major IT failures at the bank. His departure comes just a day after the bank announced it is investigating how planned maintenance of its online banking systems over the weekend left thousands of customers locked out of their accounts on Monday. TSB non-executive chairman Richard Meddings will take on the role of executive chairman as the search for a new CEO begins. Mr Meddings said: "Although there is more to do to achieve full stability for customers, the bank's IT systems and services are much improved since the IT migration."
Britain remains Europe’s most important financial centre
A new ranking to be published today by the New Financial think tank shows that Britain is the most important financial centre in Europe, and second only to the US elsewhere. The UK ranks particularly highly on international factors thanks to the size of the City's banking sector and its pivotal role in the global financial system. William Wright, New Financial's founder and managing director, noted: “London both in terms of domestic financial activity and international financial activity is in a league of its own in Europe.”
Consumer loans see slowest growth in three years
Bank of England (BoE) figures show that unsecured consumer credit grew by 8.5% in July, down from 8.8% in July. This marks the slowest growth rate in nearly three years. July saw the net amount of new consumer borrowing decline to around £800m, from £1.5bn the month before. Consumers put the second lowest amount of cash on their credit cards since April 2016 during July, at £213m. Meanwhile, BoE data shows approvals for house purchases fell to 65,000 in July with remortgaging approvals down to 45,000. In June British lenders approved 65,619 mortgages, rising 1.5% from 64,684 in May and reaching the highest level since January. John Eastgate, sales and marketing director at OneSavings Bank, said consumers are "putting the brakes on home buying decisions" amid fears of current political volatility.
Lenders could retreat from BTL market
BTL lenders experiencing sub-optimal success could quietly retreat from the market as margins in the owner-occupied space are much thinner, according to a report produced by Shawbrook Bank. Research predicted that the market would continue to dampen until 2021, before stabilising and return to growth in the following two years.
Bridging and Commercial
Wonga collapses into administration
Wonga has announced its intention to go into administration. In a statement Wonga said: "Customers can continue to use Wonga services to manage their existing loans but the UK business will not be accepting any new loan applications.” Wonga’s overseas businesses will continue to trade, the company said. The Financial Conduct Authority said it will “continue to supervise Wonga once it is in administration and is in close contact with the proposed administrators with regard to the fair treatment of customers.”
The Daily Telegraph
Land values raise UK’s wealth to £10trn
The net value of all of the UK’s assets topped £10trn for the first time in 2017, thanks to surging land and house prices. The ONS said almost all of the rise to £10.2trn from £9.75trn was fuelled by a £450bn rise in land values. Housing wealth now makes up 17.8% of the UK’s net worth, and added to land this takes the two to a total of 70.7% of net assets. The steady increase in land values is expected to trigger further calls for a land value tax or new rules allowing local authorities to benefit from the rise in values by allowing them to buy land earmarked for development.
Corporation tax receipts rocket
Figures from the Office for Budget Responsibility show corporation tax receipts have surged since the rate was cut. The levy raised £57.6bn last year, when firms handed over 19% of profits. That was 44% more than in 2010 when corporation tax was 28%. Corporation tax receipts have also risen 26% since the EU referendum. Sam Dumitriu of the free market Adam Smith Institute think-tank said the figures should prompt ministers to reduce tax on firms which invest. “A competitive corporate tax rate has made Britain a more attractive place to do business,” he said.
Accountants present proposals to shake-up the audit market
The Competition and Markets Authority is considering proposals by Britain’s nine biggest accounting firms to shake-up the audit market and end the dominance of the Big Four. ICAEW chief executive Michael Izza, David Barnes, chairman of the accountants’ Policy & Reputation Group, and a representative of ICAS met the CMA on Tuesday to propose suggestions to reform the industry. The CMA gave no indication of whether it would move ahead with a full review of the accounting profession, according to Mr Izza.
Small business group seeks to revive RBS scandal
The SME Alliance – a small business group that lobbies for fair treatment by banks and advisers – is set to launch its own investigation into the treatment of small firms by RBS’s now-defunct Global Restructuring Group. The SME Alliance’s report into the GRG aims to gather “evidence of dishonesty and lack of integrity by RBS executives” which it hopes will allow the FCA to take disciplinary action through a piece of regulation known as the senior managers’ regime (SMR).
Business borrowing falls by 2.2%
Figures from UK Finance show UK business borrowing overall contracted by 2.2% over the last 12 months. The largest fall in lending came in the construction industry, which reported a decrease of 6.9%. However, lending to manufacturers grew by 7.1%. UK business deposits for non-financial companies grew by 1.9% over the last year. Stephen Pegge, managing director, Commercial Finance at UK Finance, said overall demand for finance “remains subdued amid ongoing economic uncertainty.” Meanwhile, gross mortgage lending in July was £24.6bn, about 7.6% higher than a year earlier. Credit card spending was 8.1% higher than a year earlier, with outstanding levels on card borrowing growing by 5.3% over the year.
Bridging and Commercial Insider.co.uk
Banks failing to back small firms
Business expert Rob Rutter has accused banks of adding to the pressure on high streets by failing to support small businesses when they hit financial difficulties. He said: “Banks have become so slow and bureaucratic they are acting as a handbrake on the economy rather than an accelerant.”
Wonga close to collapse
Payday lender Wonga has said it was considering “all options” after reports suggested it was on the brink of collapse. The developments comes after a surge in compensation claims against the firm, amid a government clampdown on payday lenders. According to Sky News, the firm is exploring the possibility of a pre-pack administration. However, it could also look to sell assets, including its Polish subsidiary to bolster its cashflow.
UK banks loosen mortgage standards to maintain growth
Britain’s banks are relaxing lending standards and reducing fees in order to maintain growth, as profit margins are hit by competition and a weakening housing market
Phoenixing' bosses face bans
Directors who allow companies to go bust to avoid debts could be disqualified and fined under new powers for the Insolvency Service. Ministers want to curb so-called “phoenixing”, where liabilities such as pension deficits and supplier payments are left behind by companies who then re-emerge under a different name with a clean bill of health. The proposals will enable the Insolvency Service to take enforcement action against directors of dissolved companies for the first time.
The Sunday Telegraph
HMRC’s late payment fee increases
HMRC has increased the rate charged to businesses and individuals who pay their tax late. Following the Bank of England’s latest quarter-point rate rise to 0.75%, HMRC lifted its fee by 0.25 percentage points to 3.25%. However, the department has been criticised for having kept the repayment interest rate - the rate HMRC levies on top of sums it owes to taxpayers - at 0.5% since 2009.
Brokers wary of 1% base rate’s impact
A survey by United Trust Bank shows that 70% of 108 brokers questioned felt that a further base rate increase to 1% will negatively impact the residential property market. Some 61% of respondents operating in the fields of property and asset finance also felt a base rate increase would stifle SME investment.
Bridging and Commercial
Housing transactions remain stagnant
The number of houses being bought and sold edged further down last month, with residential transactions 3.2% lower in July 2018 compared with the same month last year, according to the latest HMRC data. Deals also fell 0.8% from June to July, with 99,270 residential transactions reached. Kevin Roberts, director of Legal & General Mortgage Club, said: “A fundamental imbalance between supply and demand continues to stifle the market, and until this issue is properly addressed, homeowners will find it difficult to downsize or upsize.”
Lender releases inaugural Buy-to-Let Report
Following Shawbrook Bank’s previous reports on the HMO market and the Private Rented Sector the NACFB Patron has released their latest research on the Buy-to-Let (BTL) market. The findings explore the impact of several recent government and regulatory changes. Set against the shifting sands of national policy, the issues discussed are vital for brokers, and the professional investor and landlord community. The 2018 Shawbrook BTL Report delivers clarity on what this means for a sector that remains a critical component of the UK housing landscape.
Bridging lending down 6.6% in second quarter
The Association of Short Term Lenders has revealed that the value of bridging loans written by its members has fallen by 6.6% in Q2 2018 on the previous quarter, although it was still up 10.3% year-on-year. Annual completions have risen by 27.2% compared with the year ending 30th June 2017, totalling £3.87bn. ASTL’s CEO, Benson Hersch, said that the “property market may be difficult at the moment, but responsible bridging lenders continue to prosper.”
Bridging & Commercial
Buy-to-let lending slumps
The number of new home loans taken out by buy-to-let landlords fell by nearly one-fifth following a series of tax changes and new regulations. UK Finance said that 5,400 buy-to-let mortgages completed in June, a 19.4% fall from June 2017, when 6,700 were completed. There was also dip in mortgages for home movers and first-time buyers, with 34,900 new first-time buyer mortgages completed in June - a fall of 3.6% on the same month a year earlier.
Specialist lending softens in June
Specialist lending market activity softened in June, driven by a weaker appetite for business investment. Lending volumes declined 3% year-on-year in the asset finance sector, according to the Finance & Leasing Association, although for the second quarter as a whole they were up 5%. The total follows on from a 10% increase in asset finance new business in May, driven by new finance for equipment in the construction, manufacturing and agricultural sectors. John Cronin, financials analyst at stockbroker Goodbody, said the slowing growth is reflective of the weaker appetite for business investment.
P2P Finance News
Slight decline in asset finance
Asset finance new business, primarily leasing and hire purchase, grew by 5% in the second quarter of 2018, according to data from the Finance & Leasing Association (FLA), though fell 3% in June compared with the same month in 2017. By channel, direct finance came in at £1.4bn, down 7% year-on-year, while broker introduced finance was up 14% to £519m and sales finance was down 6% to £922m.
UK's house price growth sluggish
Data from the Office for National Statistics (ONS) show that house prices in London dropped 0.7% in the year to June, the lowest annual growth rate since September 2009 when they fell 3.2%. Annual house-price growth across the country slowed to its lowest level in nearly five years with average property values increasing by 3%, down from 3.5% in May. Slow wage growth, rising mortgage rates and tougher rules on borrowing are constraining buyers, experts say. Chief economic adviser to the EY Item Club, Howard Archer, said: "Housing market activity is still relatively lacklustre, and we expect it to remain so as the extended squeeze on consumer purchasing power only gradually eases, consumer confidence is relatively fragile and appreciable caution persists over engaging in major transactions."
Interest rate will remain low for 20 years
Ian McCafferty, a Bank of England policymaker, has said that the era of low interest rates will last for at least another 20 years, despite official borrowing costs rising gently in the coming years. Mr McCafferty, who is leaving the MPC at the end of the month, said structural changes in the global economy meant UK borrowers and savers should get used to interest rates being “significantly” below the 5% they averaged in the 10 years leading up to the financial crisis in 2008.
Banks refusing to raise rates for savers
The Times reports that only one of 100 banks and building societies has passed on last week’s interest rate rise in full to all its savers, leading MPs and campaigners to express criticism. Nicky Morgan, chairwoman of the Treasury select committee, commented: “It’s no wonder that our banks have such a lot of work to do to rebuild trust among customers when they ignore the first opportunity to give a little something back to savers, while moving speedily to increase costs for borrowers.” Meanwhile, James Daley, the managing director of Fairer Finance, said that the FCA should focus on the issue as part of its review of the savings industry.
Shawbrook loan book hits £5.3bn
Shawbrook Group’s loan book increased by 21% to £5.3bn in the six months to 30th June 2018, while underlying profit before tax was up 23% on the same period in 2017 to £63.1m. Shawbrook said new lending had increased compared with the first half of last year as it looked to continue to expand its customer base into new and adjacent markets.
Lenders encouraged to embrace innovation
Martin Greenwood looks at some of the barriers facing property developers and housebuilders looking to solve the UK’s housing crisis, including a lack of available small sites, and securing access to finance. Alex Michelin, co-founder of CapitalRise, said: “With funding hard to obtain in today's market and buyers less prevalent than they once were, developers are having to be increasingly creative to be successful”, using preferred equity and mezzanine loans to ensure the success of a project. Terry Pritchard, head of origination at Lendy, said that lenders are increasingly risk averse, creating a space for smaller firms to move into with new products.
Development Finance Today
Bank of England raises UK interest rates to 0.75%
The Bank of England has raised the interest rate a quarter of a percentage point, from 0.5% to 0.75% - the highest level since March 2009. BoE Governor Mark Carney said there would be further "gradual" and "limited" rate rises to come, but if certain Brexit scenarios materialised the Bank would cut again if necessary. The Bank said that it did not expect interest rates to return to their long-term average of 5% “for many years” because the fundamental structure of the economy had significantly changed since the financial crash. Andrew Sentance, senior economic adviser at PwC, said: “Businesses and consumers should be able to adapt to a well-communicated and gradual series of interest rate rises, after nearly a decade of exceptionally low borrowing costs. Higher interest rates should also provide some much-needed relief to savers who have seen their investment returns eroded significantly since the financial crisis.” Meanwhile, high street banks including Lloyds, Nationwide, RBS, Barclays and HSBC, are under fire after announcing plans to hit homeowners with interest rate hikes from today while failing to pass on higher rates to savers.
UK business borrowing falls by 1.8%
Outstanding lending to UK businesses has fallen by 1.8% since June 2017, according to research by UK Finance. Loan and overdraft lending from high street banks to non-financial business accounts has decreased to £263.8bn, but was up 9.2% to manufacturers. Stephen Pegge, managing director of commercial finance at UK Finance, said: “Monthly net lending to businesses returned to positive levels in June, driven by continued growth in borrowing in the manufacturing sector.
Bridging and Commercial
FCA sets out crackdown on peer-to-peer lending
The Financial Conduct Authority is planning to crack down on peer-to-peer lenders and crowdfunding platforms amid concerns that investors could be taking on more risk than they realise. The regulator called for the publication of more detailed standardised information about investments, charges and risks lenders faced. The FCA said: “When a platform advertises a target rate of return, we want that target rate to be achievable and for investors to understand and be fairly remunerated for the risks they are exposed to.” James Hurley in the Times looks at how the growth of online finance platforms has forced the FCA to scrutinise the sector more. Meanwhile, equity crowdfunding sites have welcomed the review. Crowdcube said that “this vote of confidence for the sector highlights that existing regulations are striking the balance of effectively safeguarding investors while continuing to facilitate the growth of a vital source of finance&rdqu o; for small businesses.
Personal insolvencies at six-year high
The number of personal insolvencies in England and Wales has hit a six-year high. Figures from the Insolvency Service show there were 28,951 people declared insolvent in the past three months, a rise of 27% on the same period last year and up 4.4% on the first quarter of this year. It said the increase was driven by a record number of people taking out IVAs.
BoE tipped to raise rates
The Bank of England is expected to raise interest rates this week, pushing them to their highest level since 2009. The Monetary Policy Committee is widely expected to increase rates from 0.5% to 0.75%. Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said: “The committee likely won't vote unanimously to hike rates - we look for a 7-2 split - but most members still believe that inflation will exceed the 2% target in the medium term if they don't start to withdraw some monetary stimulus now.”
The Sunday Times
Tax change could leave commercial property owners with £8bn bill
Catax has warned that commercial property owners could be forced to pay more than £8.6bn if they fail to revalue ahead of a major tax change. From April 2019, UK commercial property held offshore will be subject to capital gains when it is sold.
Complaints Commissioner criticises FCA
The Complaints Commissioner’s 2017-18 annual report has criticised the Financial Conduct Authority regarding what it describes as “attitudinal problems”, which include ”defensiveness, lack of candour, and lack of empathy”. Commissioner Antony Townsend formally investigated 83 complaints against the FCA; 67 of them alleged that the FCA was failing to regulate the financial services industry properly, and in many cases this hinged on a specific firm as an example. He found the FCA has an "unwillingness to admit error" and spends too much time "constructing defences for past actions". In response, the FCA said: “We do accept that we could seem defensive sometimes and we will work on how to communicate in a more effective and transparent way”.
Demand for bridging finance rises
According to the MTF Broker Sentiment Survey, one third of the122 specialist brokers canvassed said funding development projects was the most popular reason for completing a bridging loan in the second quarter of the year. This was up from 24% during the same period of 2017. Refurbishment was the second most popular reason for getting a bridging loan at 27%, compared to 19% during the second quarter of 2017. MTF found that overall demand for bridging finance increased in the second quarter, with 38% of brokers noticing a rise in bridging loan volume, up from 30% in the first quarter of 2018. The biggest demand for bridging loans in Q2 2018 came from the South East, followed by the Midlands.
FCA to monitor early arrears
The Financial Conduct Authority is looking into the fact that three in every 1,000 new mortgage customers are unable to meet their monthly payments within six months of the loan being taken out, with one in every 600 into arrears by the point the second payment is due. The regulator said: “Where a consumer falls into arrears within a short period of time (two to six months) this could be an indicator of an unsuitable or unaffordable product having been sold.” It added that it would monitor the situation as “any sustained increases may indicate that we need to do more work to assess if the harm of unaffordable or unsuitable mortgage sales is increasing.”
The Daily Telegraph
Rise in UK landlords incorporating their portfoliosThistle Finance has reported a 30% rise in the number of UK landlords incorporating their portfolios during Q2 2018 compared with the previous quarter. Commenting on the fact that the average size of portfolios being incorporated fell by around 40%, Mark Dyason, managing director at Thistle Finance, said: “Landlords that are genuinely committed to buy-to-let are starting to optimise their portfolios, not just by remortgaging on to better rates – where there’s a huge amount of activity – but by moving into limited company ownership.”
Bridging and Commercial
Bridging lenders have rushed into development finance
Jonathan Newman, senior partner at Brightstone Law, says there has been an increase in lenders over-valuing the gross-development-value of properties, affecting whether they come to market. “Short-term lenders went into development finance in a hurry probably circa four or five years ago” he said, adding “It is quite a specialist area of lending … Lenders are now beginning to see problems arise which they weren’t expecting mainly as a result of a lack of experience”. He describes development lending as “double the risk” of other types, and advises lenders use experienced solicitors, specialist valuers and knowledgeable quantity surveyors to manage risk.
MoneySupermarket looks to mortgage market
MoneySupermarket is investing £1m in Podium, a start-up aimed at digitising the process of taking out a mortgage. The Times notes that the move, a 50/50 joint venture with entrepreneurs Matt Denman and Mark Hawkins, puts MoneySupermarket in competition with fintech firms such as Trussle, Habito and Dynamo, who are also developing digital mortgage broking services.
Financial services helping to boost SME economy
Research from Amazon has shown that financial services are among the sectors that are leading the SME economy, with companies in the sector seeing a 1.7% increase in revenues over the past year. The Q2 2018 Amazon SME Growth Tracker from Capital Economics found that while small business owners across all regions were not feeling positive about their business conditions over the coming year, SMEs in the financial services sector were feeling more optimistic, with the SME Confidence Index showing a score of +3. Commenting on the research, Amazon’s UK Country Manager Doug Gurr said that it is clear that if there is confidence in business conditions, then owners of small businesses are creating plans for job creation, growth and investment, so the more that can be done to increase SME business confidence, the greater the benefits are for the whole of the economy.
London School of Business and Finance
Lawyers offer cautious welcome to FRC’s new code
The Times’ Jonathan Ames talks to a selection of lawyers about the Financial Reporting Council’s updated corporate governance code. The changes, which aim to improve workforce relations and the independence of board chairs, and will require remuneration committees to consider reputational and other risks from excessive pay, were broadly welcomed. The paper also notes that the BEIS consultation on legal reform for companies facing insolvency has ended. The proposals would make directors of a parent company personally liable for losses to a subsidiary’s creditors where that subsidiary is sold and subsequently fails. This plan, says Jamie Nellany, a lawyer at Addleshaw Goddard, would be “at odds with the concept of limited liability and our business-rescue culture.”
Unelected decision makers need reining in
Former deputy governor of the Bank of England Sir Paul Tucker has called for the Financial Conduct Authority to be reformed or stripped of its independence. Sir Paul was commenting on the power held by unelected technocrats within Britain’s regulatory structures arguing that the more influence they have the more “alienated people will become.”
Specialists and challengers see biggest mortgage lending growth
New mortgage lending data from UK Finance shows that specialist lenders and challenger banks saw the biggest growth in lending over 2017. Gross lending totalled £257bn, up 4% on 2016, slightly down on the 11% growth rate seen in 2016. Challenger banks and specialist lenders saw an almost 20% increase in activity. UK Finance warned that uncertainties relating to the UK economy "have the potential to affect the path of lending for the rest of this year and beyond".