UK fixed mortgage rates rise to seven-month highs – business live

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Just in: sales volumes at UK retailers have fallen for the second month running, a new survey shows.

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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.

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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.

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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%).

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Over in Germany, business morale has worsened for the second month running as its economy struggles to emerge from recession.

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The Ifo institute’s business climate index dropped to 88.5 in June, down from 91.5 in May, a larger decline than expected. A Reuters poll of analysts had predicted a fall to 90.7.

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Ifo’s president Clemens Fuest says:

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“Sentiment in the German economy has clouded over noticeably.”

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ING economist Carsten Brzeski fears that the rebound of the German economy has ended before it ever really began, following last winter’s recession.

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Brzeski adds:

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The weaker-than-hoped-for Chinese reopening, a looming US recession and ongoing monetary policy tightening seem to be weighing on German company sentiment.

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German business outlook plummets as shadow of recession lingers https://t.co/T7SuKV1MmI pic.twitter.com/eNVrwYPR7O

&mdash; Zoe Schneeweiss (@ZSchneeweiss) June 26, 2023

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UK and European wholesale gas prices have jumped this morning.

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Bloomberg reports that the short-lived rebellion in Russia last weekend has “added to supply fears in an already volatile market”.

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The European month-ahead benchmark is up over 6% at €35.15 per megawatt-hour, and was up 13% at one stage this morning.

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UK gas price also gained around 10%, with the month-ahead price rising to 87.5p per therm.

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Traders are judging that Russian geopolitical risk now is significantly higher than before the weekend, following mercenary leader Yevgeny Prigozhin’s brief mutiny.

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George Lagarias, chief economist at accountancy group Mazars, says:

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“Whether we like it or not, Russia is very important for the global supply chain, due to its status as a major energy supplier and commodities exporter. And the question is not how we will think about things long-term, but how commodity traders and corporates will react over the shorter term. Will they try to hoard commodities and energy, fearing fresh instability out of Russia?

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“A running theme since the beginning of the year for us was increased uncertainty and unpredictability, in a world that shows no signs of returning to its pre-pandemic balance. While we don’t know what happened, we should not be surprised if we see upheaval in the commodities market, as investors fear further destabilisation.

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“Further instability could, in theory, add to inflationary pressures, at a time when we at least thought that supply chain issues were behind us.

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“Sticky inflation is probably the key risk for 2023. The biggest economic and financial concern from further Russian instability is that supply chain breakdowns could lead to a fresh inflationary cycle, at a time when we are not nearly done fighting the previous one.”

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UK fixed-rate mortages costs have jumped to new seven-month highs, adding to the financial pressures on borrowers.

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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.

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That’s the highest since 16 November, when the property market was reeling from the chaos after the mini-budget.

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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.

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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%.

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The number of residential mortgage products on the markets has risen, though, to 4,483 from 4,444 on Friday.

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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.

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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

&mdash; Rachel Reeves (@RachelReevesMP) June 26, 2023

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Shares in European defence companies are falling in early trading, as investors react to last weekend’s aborted armed mutiny.

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BAE Systems are the biggest faller on the FTSE 100 index in London, down 3%.

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Italian defence group Leonardo, Sweden’s Saab, Germany’s Rheinmetall and France’s Dassault Aviation were all down more than 3%.

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This has pulled an index of European aerospace and defence stocks down by 1.5%, following a 30% surge over the last 12 months.

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The rebellion by the Wagner group of mercenaries is raising questions about President Vladimir Putin’s grip on power, and the path of the Ukraine war.

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Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:

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The Wagner incident may have exposed Putin’s weakness, and was the most serious threat to his rule in two decades. It could be a turning point in the war in Ukraine. But nothing is more unsure.

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Banking giant HSBC is to leave its Canary Wharf headquarters after more than two decades, and shift its workforce to a smaller offce in the City.

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A memo seen by Reuters shows that HSBC told staff its preferred option was to move to BT’s former head office near St Paul’s, which has been redeveloped.

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The bank began a review to assess its “best future location in London” last year, Reuters reported, ahead of its lease expiring at the 45-floor tower at 8 Canada Square in early 2027.

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According to The Times, which first reported HSBC’s decision earlier this morning, the bank has been considering several potential new offices since it told staff last Septemner it could leave its Canary Wharf tower.

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The Panorama St Paul’s development is around half the size of the Canary Wharf site, but less space is needed following the move to hybrid working after the pandemic.

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Primark’s trading in the UK in June was stronger than the 6% like-for-like sales growth achieved in the 12 weeks to May 27, benefiting from warm weather, Eoin Tonge, finance director of parent company ABF, says.

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Tonge also told Reuters that consumers have shown resilience despite gloomy commentary.

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\n

“Every quarter that’s gone by, it keeps on reminding us that the consumer has been more resilient than the doom and gloom.

\n

“The doom and gloom has been around now for almost 12 months and the consumer continues to outperform the doom and gloom.”

\n

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Here’s Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service, on ABF’s profit upgrade this morning.

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\n

“Cost conscious consumers – who are after all, Primark’s bread and butter – have kept the tills ringing despite the cost of living crisis raging on in the UK. The no-frills fashion retailer, which has still only established the most basic of online presences, saw sales rise 13% in the third quarter.

\n

“Giving its latest trading update, owner Associated British Foods, said higher average selling prices had boosted sales 7% like-for-like, in the three months under review, meaning like-for-like sales growth for the year is now at 9%. The sales of summer essentials, plus a boom in its beauty range, means that full year adjusted operating profits are now expected to be ‘moderately’ ahead of last year’s.

\n

“Primark’s global expansion into Slovakia and with the signing of its first lease on a store in Texas, means the Primark brand is now in 16 countries – all predominantly reliant on good old-fashioned in-store shoppers.”

\n

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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

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Hiking prices has proved profitable for Primark-owner Associated British Foods.

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ABF has told shareholders this morning it now expects adjusted operating profit for the current financial year to be “moderately ahead of last year,” having previously expected to be “broadly in line”.

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Sales across the group have grown 17% so far this year, and were up 16% in the third quarter (the 12 weeks to 27 May).

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Primark, the discount clothes chain, has seen good demand for summer ranges, ABF says. Total sales were up 13% in the last quarter, while like-for-like sales grew 7%, “supported by higher average selling prices.”

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Those higher prices will be a blow to struggling households. But despite them, sales at Primark’s flagship city centre stores have “continued to be good”, ABF adds.

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The group’s food arm, which produces ingredients such as flour and sugar and various grocery brands including Twinings and Ovaltine, has also recorded good trading, with sales up 18% this year.

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ABF adds that price rises, following the jump in commodity costs, lifted revenues, saying:

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\n

In particular, we have seen strong constant currency sales growth in Grocery and Ingredients largely driven by the necessary pricing actions taken earlier in the year to offset input cost increases.

\n

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"src":"https://i.guim.co.uk/img/media/06a96f4c8363b19c450da2faf4ca316360d685ae/0_0_2048_636/master/2048.jpg?width=480&quality=85&auto=format&fit=max&s=65958a0dd467f72d04aa5caa80285bd7","width":480},{"src":"https://i.guim.co.uk/img/media/06a96f4c8363b19c450da2faf4ca316360d685ae/0_0_2048_636/master/2048.jpg?width=480&quality=45&auto=format&fit=max&dpr=2&s=4e104b5eab435276c720a5658fa07ab5","width":960}]}],"elementId":"debde9c1-2e1a-4d79-89ff-836ce664fcb8"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

ABF’s ‘necessary pricing actions’ have helped to push up prices in the shops, with UK food inflation hitting 19% this year.

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This has added to the squeeze on consumers, with new figures last weekend showing that millions of renters are being hit by landlords passing on higher mortgage costs to their tenants.

","elementId":"12459c32-63bf-4e6d-bb98-47043d8596d6"},{"_type":"model.dotcomrendering.pageElements.RichLinkBlockElement","url":"https://www.theguardian.com/money/2023/jun/24/uk-mortgage-rate-crisis-driving-record-rent-squeeze-as-landlords-pass-higher-costs-on-to-tenants","text":"UK mortgage rate crisis driving record rent squeeze as landlords pass higher costs on to tenants","prefix":"Related: ","role":"thumbnail","elementId":"a7cce4f5-c508-4e3e-beee-41308471d814"},{"_type":"model.dotcomrendering.pageElements.SubheadingBlockElement","html":"

Also coming up today

","elementId":"12bdb1aa-182f-44da-b945-a4ada12d270d"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

Jeremy Hunt is set to meet industry regulators on Wednesday, to ask what they are doing about any companies exploiting rampant inflation by raising prices.

","elementId":"59e9d2f3-7d63-49df-ac80-2d7ddbeae201"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

The Chancellor is set to meet the Competition and Markets Authority (CMA), and the watchdogs for energy, water and communications on Wednesday, and will press them on whether there is a profiteering problem in their sectors and what they are doing about it, Treasury sources say.

","elementId":"d42cdb8e-ab3b-4b0d-b272-5ab937b82d7d"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

In the financial markets, the Russian rouble fell to a near 15-month low against the dollar this morning, as traders react to last weekend’s aborted mutiny by the Wagner mercenary group. The rouble dropped to 87.2300 to the dollar, its weakest point since late March 2022.

","elementId":"000baea2-60d2-4ef8-b576-96f5f2cac523"},{"_type":"model.dotcomrendering.pageElements.RichLinkBlockElement","url":"https://www.theguardian.com/world/2023/jun/25/prigozhins-march-on-moscow-chronology-of-an-attempted-coup","text":"The Wagner uprising: 24 hours that shook Russia","prefix":"Related: ","role":"thumbnail","elementId":"f2a0a447-8aba-4686-8c76-4458105c9896"},{"_type":"model.dotcomrendering.pageElements.TweetBlockElement","html":"

The Russian rouble opened at a near 15-month low against the dollar in early morning trade on Monday, responding for the first time to an aborted mutiny by heavily armed mercenaries over the weekend. pic.twitter.com/h1BBfW4RJZ

&mdash; Srbija Evropa (@srbija_eu) June 26, 2023

","url":"https://twitter.com/srbija_eu/status/1673194925876191238","id":"1673194925876191238","hasMedia":false,"role":"inline","isThirdPartyTracking":false,"source":"Twitter","elementId":"b7a0f59e-e456-4ff4-b83f-b0ec5073733e"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

And UK borrowers will be watching nervously for signs that interest rates may be heading higher, after last Thursday’s Bank of England rate rise.

","elementId":"a9bd839a-d81f-46e4-9af4-073b39368d07"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

Yesterday, Rishi Sunak urged homeowners and borrowers to “hold their nerve” over rising interest rates, as the fight to lower inflation continues, prompting criticism that the PM is out of touch on the the cost of living crisis.

","elementId":"1797a633-db25-46be-a6e1-5ab4ecfcb608"},{"_type":"model.dotcomrendering.pageElements.TweetBlockElement","html":"

'Out-of-touch' Rishi Sunak tells struggling families UK must 'hold our nerve' https://t.co/9ZhF3jrpoW. The elite of are selling the workers down the river. Yet saying they have no choice, putting up interest rates has not worked, they have being doing it for months. Stop now.

&mdash; oraina curry (@OrainaC) June 25, 2023

","url":"https://twitter.com/OrainaC/status/1673096217545302017","id":"1673096217545302017","hasMedia":false,"role":"inline","isThirdPartyTracking":false,"source":"Twitter","elementId":"b1dbe123-c7a7-488c-9913-793491041086"},{"_type":"model.dotcomrendering.pageElements.SubheadingBlockElement","html":"

The agenda

","elementId":"d550c666-b0ad-4d90-8014-26955f78d5b4"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

\n

• 9am BST: IFO survey of German business conditions

\n

• 11am BST: CBI distributive trade survey of UK retail

\n

• 3.30pm BST: Dallas Fed manufacturing index

\n

• 6.30pm BST: European Central Bank forum on central banking

\n

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Key events

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 ou.

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.

But for 2023 as a whole, the German economy is forecast to 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:

• 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%).

• 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%).

• 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%).

Santander are increasing their purchase and remortgage rates from this evening, brokers report.

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And just like that, not even 10.30am and Santander confirms it is increasing mortgage rates tomorrow.

&mdash; George Nixon (@George_Nixon97) June 26, 2023

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And just like that, not even 10.30am and Santander confirms it is increasing mortgage rates tomorrow.

— George Nixon (@George_Nixon97) June 26, 2023

Full applications to secure today’s rates need to be filed by 10.30pm tonight, we hear.

Santander will also be updating their affordability tests, which could make it harder for borrowers to qualify for a deal.

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2 year fixed mortgage rates now 6.23% and Santander have announced they are raising their #mortgage rates tomorrow .#HoldYourNerve https://t.co/j7UvoAUKG4

&mdash; Julie McHamish (@julesmchamish) June 26, 2023

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Santander UK’s chief executive, Mike Regnier, was among the bank bosses who met with chancellor Jeremy Hunt last Friday, where lenders agreed that struggling mortgage holders will be given a 12-month grace period before their repossession proceedings begin

UK fixed-rate mortgage costs are moving towards the highs set last autumn, points out The Times’s George Nixon:

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Anyone hoping for a quiet week after whatever-the-hell last week was might have to readjust their expectations.

Average 2-y fix now up to 6.23%, say Moneyfacts, remember the post-Truss peak was 6.65% so we're fast heading there. pic.twitter.com/lqbJlbzuQz

&mdash; George Nixon (@George_Nixon97) June 26, 2023

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Anyone hoping for a quiet week after whatever-the-hell last week was might have to readjust their expectations.

Average 2-y fix now up to 6.23%, say Moneyfacts, remember the post-Truss peak was 6.65% so we’re fast heading there. pic.twitter.com/lqbJlbzuQz

— George Nixon (@George_Nixon97) June 26, 2023

German business sentiment falls as recession lingers

Over in Germany, business morale has worsened for the second month running as its economy struggles to emerge from recession.

The Ifo institute’s business climate index dropped to 88.5 in June, down from 91.5 in May, a larger decline than expected. A Reuters poll of analysts had predicted a fall to 90.7.

Ifo’s president Clemens Fuest says:

“Sentiment in the German economy has clouded over noticeably.”

ING economist Carsten Brzeski fears that the rebound of the German economy has ended before it ever really began, following last winter’s recession.

Brzeski adds:

The weaker-than-hoped-for Chinese reopening, a looming US recession and ongoing monetary policy tightening seem to be weighing on German company sentiment.

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German business outlook plummets as shadow of recession lingers https://t.co/T7SuKV1MmI pic.twitter.com/eNVrwYPR7O

&mdash; Zoe Schneeweiss (@ZSchneeweiss) June 26, 2023

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Back in the City, the FTSE 100 share index has hit a three-month low.

The blue-chip index has dropped by 55 points, or 0.75%, to 7407 points, the lowest since late March.

Weapons manufacturer BAE Systems are still the top FTSE 100 faller, down 3.3%, followed by Vodafone (-2.3%) and Lloyds Banking Group (-2.3%).

A chart showing UK mortgage rates

European gas prices rise as Russian mutiny fuels supply fears

UK and European wholesale gas prices have jumped this morning.

Bloomberg reports that the short-lived rebellion in Russia last weekend has “added to supply fears in an already volatile market”.

The European month-ahead benchmark is up over 6% at €35.15 per megawatt-hour, and was up 13% at one stage this morning.

UK gas price also gained around 10%, with the month-ahead price rising to 87.5p per therm.

Traders are judging that Russian geopolitical risk now is significantly higher than before the weekend, following mercenary leader Yevgeny Prigozhin’s brief mutiny.

George Lagarias, chief economist at accountancy group Mazars, says:

“Whether we like it or not, Russia is very important for the global supply chain, due to its status as a major energy supplier and commodities exporter. And the question is not how we will think about things long-term, but how commodity traders and corporates will react over the shorter term. Will they try to hoard commodities and energy, fearing fresh instability out of Russia?

“A running theme since the beginning of the year for us was increased uncertainty and unpredictability, in a world that shows no signs of returning to its pre-pandemic balance. While we don’t know what happened, we should not be surprised if we see upheaval in the commodities market, as investors fear further destabilisation.

“Further instability could, in theory, add to inflationary pressures, at a time when we at least thought that supply chain issues were behind us.

“Sticky inflation is probably the key risk for 2023. The biggest economic and financial concern from further Russian instability is that supply chain breakdowns could lead to a fresh inflationary cycle, at a time when we are not nearly done fighting the previous one.”

The cost of buy-to-let mortgages appears to have stabilised.

Moneyfacts reports:

• The average 2-year buy-to-let residential mortgage rate today is 6.49%. This is the same average rate as the previous working day.

• The average 5-year buy-to-let residential mortgage rate today is 6.39%. This is down from an average rate of 6.40% on the previous working day.

• There are currently 2,459 buy-to-let mortgage products available. This is up from a total of 2,412 on the previous working day.

Todays rise in rising mortgages rates will do nothing to defuse the UK’s mortgage timebomb.

More than a quarter of UK homeowners on a fixed-rate mortgage are heading for sharp increase in monthly payments before the next election, following the rise in interest rates over the last 18 months or so.

A chart showing the UK mortgage timebomb

Today’s 2-year tracker rate is 5.84%, Moneyfacts report, up from an average rate of 5.66% on Friday.

The standard variable rate as of 1 June 2023 is 7.52%.

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.

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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

&mdash; Rachel Reeves (@RachelReevesMP) June 26, 2023

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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

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