LONDON’S BUSINESS NEWSPAPER
LICENCE TO TRAVEL EXPLORE EUROPE LIKE JAMES BOND IN THESE 007 HOTSPOTS P17
RALLYING CRY KEY CHIEF TELLS US WHY TENNIS IS ASLEEP AT THE WHEEL P19
BANK SET TO HIKE RATE YET AGAIN
MONDAY 19 JUNE 2023
ISSUE 3,997
CITYAM.COM
FREE
HOMEOWNERS BRACE FOR FURTHER PAIN THIS WEEK JACK BARNETT AND CHRIS DORRELL THE BANK of England is nailed on to raise interest rates for the 13th meeting in a row this Thursday, but markets think there’s an outside chance governor Andrew Bailey and co will revert to an outsized rise to tame what is emerging as the worst inflation problem in the rich world. Markets reckon the nine-strong Monetary Policy Committee (MPC) – the group of people who set official interest rates in Britain – will kick borrowing costs up 25 basis points to 4.75 per cent this week, taking them to their highest level since April 2008. However, some think there’s an outside chance the MPC will lift rates 50 basis points, something they have not done since February, in order to signal to markets they are serious about bringing inflation back to the two per cent target.
“A 50 basis points increase seems less likely, but is not out of the question,” analysts at consultancy Oxford Economics said in a note to clients last week. Traders think there is an about 20 per cent chance of such a rise happening. A string of data of late has indicated UK inflation is proving much harder to tackle compared to the US and Europe. Prices have increased 8.7 per cent over the last year to April, a smallerthan-expected drop from 10.1 per cent in March. In America and Europe, inflation has dropped to four per cent and 6.1 per cent respectively. Core UK inflation – which strips out energy and food price movements – leapt to 6.8 per cent from 6.2 per cent, while services inflation, which the Bank focuses on, also rose. Fresh figures from the Office for National Statistics on Wednesday are expected to show the rise in the cost of
living fell to 8.3 per cent in the 12 months to May, its lowest level since March 2022. Economists have warned the risk of recession gripping the UK would rise significantly if the Bank were to meet market expectations and hoist borrowing costs to around six per cent. A wave of more than 1m homeowners rolling off of their existing lowerrate mortgage deals and onto contracts with much more punitive monthly repayments is tipped to drive the economic slowdown. Analysis from the Resolution Foundation has found that average annual mortgage repayments will climb £2,900 for this group next year. Rates on two-year and five-year mortgages have pushed up to nearly six per cent in response to financial markets raising their peak Bank rate forecasts. Last week, lenders Nationwide, HSBC and Natwest all jacked up rates on their products.
‘CONSTRUCTIVE’ US and China meet in bid to cool tensions LUCY KENNINGHAM US SECRETARY of state Anthony Blinken and Chinese foreign minister Qin Gang met yesterday in Beijing to begin a two-day set of talks. Whilst neither side expects a major breakthrough to emerge, US officials said the main goal is to stabilise a relationship that has become extremely tense. The talks come at a time of increasing tensions between the two superpowers over Taiwan and trade,
not helped by the memory of the surveillance balloon incident of February this year, which scuppered a previous attempt to meet. Yesterday Blinken hailed the conversations as “candid” and “constructive” while Qin confirmed Beijing was committed to building a stable, predictable and constructive relationship with the US. He did, however, warn that Taiwan was the “most prominent risk” for relations. The US reported that Qin has agreed to visit Washington later in the year.
FCA under pressure to probe Home REIT over claims it misled the market EXCLUSIVE
CHARLIE CONCHIE THE CITY watchdog is under pressure to investigate scandal-hit social housing investor Home REIT on the grounds it repeatedly misled the market and left investors “badly burnt”, City A.M. can reveal.
In a letter to the Financial Conduct Authority (FCA) obtained by City A.M., Home REIT shareholder The Boatman Capital called for a probe into claims the firm made on the quality of its housing stock and rental income. Home REIT, which claimed to invest in “high quality”
accommodation for the homeless, has been engulfed by scandal since November last year when short seller Viceroy Research sounded the alarm over the quality of its tenant base. The firm initially dismissed the claims made by Viceroy but has
since admitted that its rental take has collapsed and its sprawling portfolio of properties would require some £15m£20m to refurbish. The shareholder has called on the FCA to investigate
the claims it has made to the market. “Investors have been badly burnt by Home REIT and we believe one reason for this has been the company’s failure to provide complete and accurate information to the market,” it said in the letter. £ CONTINUED ON P3
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