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CITYAM.COM
FREE ANDREW GRIFFITH
City Minister: Pension funds need a nudge CHARLIE CONCHIE
BRITS SET FOR MORTGAGE HELL
CHRIS DORRELL
REMORTGAGING Brits are being hit by an average interest rate of 6.66 per cent – the highest figure since the global financial crisis. The 6.66 per cent mark – as well as mirroring the mythical ‘number of the beast’ – tops last month’s 6.65 per cent figure for a two-year fixed mortgage, new figures from Moneyfacts revealed yesterday. Having fallen steadily since the market panic over Liz Truss’ mini-budget in October, mortgage rates have spiralled in recent weeks as inflation has remained persistently higher than the Bank of
England’s target, raising the likelihood of further interest rate rises. The sky-high mortgage rate is also pricing first-time buyers out of the market. “The hit to affordability for new buyers from the rise in mortgage rates… looks huge,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said. Tombs calculates that average buyers will have to allocate 31 per cent of their disposable income to monthly mortgage payments if rates and house prices stay high, “a level only briefly sustained for eight months in 2007 so far this century,” he said. Those calculations were made even before yesterday’s rates revelation.
Leading bankers have said that an increasing number of customers will face financial difficulties as mortgage rates rise, but remained confident that both consumers and lenders could withstand the pressure. Bradley Fordham, mortgage director at Santander, said that with rates at six per cent, the average increase in monthly payments for customers coming off a deal at 2.3 per cent would be around £350 per month. “That is significantly more. In this environment you would expect more customers to have some financial difficulty,” Fordham told MPs yesterday. As a result of the increase in mortgage
costs, many of the lenders said they would likely see a small rise in arrears, but they repeatedly stressed that it was unlikely to be too severe. “We will see more and more customers with more financial stress, but I expect that to be relative to the market. And there are options available to those customers that are experiencing financial difficulties,” Charlotte Harrison, interim chief executive of home financing at Skipton Building Society, told MPs. Rate hikes will likely swell supply and dampen demand in the housing market, with signs already emerging in recent data that house prices are beginning to slip.
THE GOVERNMENT may need to corral top pension funds into investing in London’s stock market as ministers look to boost domestic investment in Britain’s big listed firms, the City minister has said. The call comes after the Chancellor won a commitment from firms to punt at least five per cent of defined contribution pension cash into start-ups and unlisted firms, with Aviva, L&G and Phoenix backing the plans. But City Minister Andrew Griffith told City A.M. that the government may now need to win a similar commitment from the pension sector to invest in listed firms to solve a slump in investment into the stock market. “The focus above all else [is] on delivering the best performance for members, and everybody wants to make pensioners’ money or long term savers’ money work harder for them,” Griffith said. He added that while the compact made between the Lord Mayor and the Chancellor had a particular focus on private companies, the reforms within the broad area of pensions “should speak to greater opportunities in the UK public markets”.
London City Airport appeals Newham Council’s decision to block growth plans GUY TAYLOR LONDON City Airport has said it will appeal Newham Council’s decision to block its plans to expand flying hours and passenger capacity. The airport is attempting to boost its passenger capacity from
6.5m to 9m and extend operating hours at the hub, which it said would create more than 4,500 additional jobs and add over £700m to London’s economy. But councillors on Newham Council’s Strategic Development Committee voted unanimously to
reject the proposals on Monday, largely due to noise pollution concerns . “This was the wrong decision and did not properly balance the limited impacts with the very significant benefits of the proposals, particularly in the context of
government policy, including making best use of existing runway capacity,” the airport said in a statement yesterday. The appeal is now with the Planning Inspectorate. Robert Sinclair, London City Airport’s chief executive, said he
was “disappointed” with the council's decision. “We have worked incredibly hard to develop proposals that genuinely reflect concerns raised, sought feedback from our local community and worked closely with the Council’s planning officers,” he said.
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