BUSINESS WITH PERSONALITY
BETTER WITH AGE? WHY IS HOLLYWOOD SO OBSESSED WITH GERIATRIC MEN P19
OIL BE DAMNED GREENPEACE TO DISRUPT RUGBY WORLD CUP P24
MORTGAGE PAIN LOOKS SET TO STAY
THURSDAY 31 AUGUST 2023
ISSUE 4,039
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MORTGAGE APPROVALS PLUMMET AS RATE RISES BITE LAURA MCGUIRE AND CHRIS DORRELL THE NUMBER of mortgage approvals fell sharply in July thanks to the impact of rising rates, with experts predicting the housing market will remain “sluggish” for months to come. According to Bank of England data, the number of mortgage approvals dropped 10 per cent in July, falling to 49,400 compared to 54,600 the month before. July’s figure of 49,400 was below the 51,000 predicted by economists, and reinforces the increasingly bleak picture for the UK’s housing market, which is struggling under the weight of rising interest rates. In an attempt to combat inflation, the Bank of England has hiked rates 14 times in a row, bringing the base rate to a post-financial crisis high of 5.25 per cent. As a result, many households are having to pay hundreds of pounds a
month more to cover their mortgages. Around 1m families will pay at least an additional £500 a month to service their mortgage, the Bank estimated earlier this year. “The affordability squeeze from high mortgage rates and high inflation remains acute, leaving many prospective buyers with no choice but to step back from the fray until they can make the numbers work,” Myron Jobson, senior personal finance analyst at Interactive Investor, told City A.M. While mortgage rates have started to fall from their peak in July, experts said this had not yet had an impact on the market. “Mortgage rates only steadied and began easing during the final 10 days of the month, which has helped to improve sentiment, but only to a point,” Simon Gammon, managing partner at Knight Frank Finance, said. “Fixed rates are generally still in the fives, which is far higher than borrow-
ers are used to and is constraining their ability to meet current asking prices,” he added. Reflecting the affordability squeeze, HSBC UK yesterday launched a new 40-year mortgage which offers borrowers lower monthly repayments, which may be more attractive with costs rising. Andrew Matson, head of mortgages at HSBC UK, said they were hoping to make mortgages “more manageable” for borrowers. While inflation is on its way down, the City expects the Bank of England to hike interest rates at least once more this year, with a 25 basis point hike all but certain for the next meeting in September. “The scale of the recent rise in interest rates... means housing market activity seems destined to remain sluggish for the foreseeable future,” Martin Beck, chief economic advisor to the EY Item Club, said.
ALL NEW AT PRU Prudential boss impresses with fresh growth plan CHARLIE CONCHIE SHARES in insurance giant Prudential were given a boost yesterday after the firm announced a fresh growth push into Asia and Africa. The firm announced a new strategic plan under new chief Anil Wadhwani – his first major update since taking the top job in February. It said the new plan will build a “sustainable growth platform, through targeted investment in structural growth markets across Asia and Africa”. Under the new plans, Prudential said
it was looking to grow new business profit at 15-20 per cent a year between 2022 and 2027. The update came as the firm reported adjusted operating profits were up six per cent to $1.46bn (£1.15bn) in the period in the six months to the end of June. New business profits meanwhile, a key gauge of predicted profits on products, ticked up 39 per cent in the period to $1.49bn, above analyst expectations. The update was well received in the City, with shares bouncing over three per cent in morning trading before closing up 1.5 per cent.
Another one? Tech firm snatched from London’s markets in £203m deal CHARLIE CONCHIE ANOTHER tech firm looks set to be snatched from London’s markets after bosses at Instem struck a £203m take-private deal with a US healthcare investor yesterday. Instem, an AIM-listed life sciences software specialist, said the board
had agreed to an 833p per share cash offer and would now recommend the deal to shareholders. US-headquartered Archimed has set up a new company called Ichor to buy the group and said it is looking to leverage Instem’s “deep industry knowledge and network” to accelerate its growth strategy.
David Gare, chair of Instem, yesterday said the deal would allow the firm to channel cash into growth without triggering fears over mounting losses. “The offer from Bidco represents an attractive valuation and offers shareholders the certainty of cash today, while also fairly reflecting the
exceptional quality of the Instem business, its people and its future prospects,” Gare added. “Under [Ichor’s] private ownership, without the costs and regulation of a listed company, Instem will be able to pursue its organic growth strategy.” The deal may unsettle some in the City following a slew of deals
plucking firms from London’s markets over the past 18 months. London-listed firms remain cheap by global standards as a weak pound and the lingering impact of Brexit weigh on valuations. But the expected rise in take-private deals has failed to materialise at the pace some feared earlier this year.
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