Mortgage market turmoil prompts record numbers of people to take out loans of more than 35 yearsHundreds more home loan deals have been pulled by banks and building societies since the end of last week while rates on new fixed mortgage deals are continuing to ratchet upwards, the latest data reveals.The continuing turmoil in the mortgage market is also prompting record numbers of people to take out loans of more than 35 years in an attempt to make their monthly payments more affordable. Continue reading...
The Business Council is set up by British Chambers of Commerce backed by big companiesA new business lobby group backed by big companies including BP and Drax has been launched, a day before a key vote that will determine the future of the embattled Confederation of British Industry.The Business Council, launched by the British Chambers of Commerce (BCC), aims to bring together business leaders “who are looking for a different kind of representation”. Continue reading...
It’s reasonable to expect a fall in nominal house prices of at least 10%. That’s a chunky fall – and a welcome oneApril is supposed to herald the start of a British ritual: the house-buying season. Traditionally, it is the time when demand for homes picks up and the property supplements in the weekend papers are full of suggestions for sellers bidding to attract the interest of buyers.But not this year. According to the latest bulletin from the Bank of England, repayments on existing mortgages in April were £1.4bn higher than new loans. This is unusual. Apart from during lockdown, it was the lowest figure since records began in 1993. The number of new mortgage approvals – loans agreed but not yet advanced – fell in April and were well below the average in the five years leading up to the pandemic. Continue reading...
The president has outmanoeuvred his opponents again and shown that the right, both in the US and the UK, has no riposte to his brand of economicsHe stumbles when coming down the stairs of Air Force One; he trips over a sandbag on stage to fall flat on his face when handing out diplomas at the US air force academy; he muddles his words with alarming regularity. It is easy to write off President Joe Biden as a senile, 80-year-old duffer. Yet he is already being regarded by many Democrats, and some Republicans, as significant a Democratic president as Franklin Roosevelt or Lyndon Johnson. He is dramatically changing the face of the US around Democratic priorities – reindustrialisation to support blue-collar jobs and wages, wholeheartedly fighting climate change, investing massively in science and education, doing more for the poorest and, not least, rejuvenating the US’s decaying public infrastructure.But, unlike his famous predecessors, he has never had their big majorities in Congress, and after November’s midterm elections he does not even control the House of Representatives. He has had to rely on guile, sheer political craft and reading the Washington runes better than any alive. For the last few months we were being warned of financial Armageddon, as an implacable Republican party forced the US to default on its debts, only to be avoided if the administration agreed to its demands for swingeing public spending cuts to avoid going through an artificial debt ceiling limit. Tomorrow was to be the witching day when default occurred and a financial crisis engulfed the world. Instead, last week the wily Biden again outfoxed his opponents, and struck a deal massively weighted in his favour that was voted for by overwhelming majorities. It was an extraordinary victory and, when invited to claim it as such, he replied: “You think that’s going to help me get it passed?” First rule in Washington politics, from which the affable Biden has never deviated: always allow the defeated to save face because you’re soon going to have to cut another deal with them. Continue reading...
Central banks seem blind to one of the real causes of inflation: profiteering under cover of Covid and the Ukraine warGreedflation will probably prove to be a brief moment in history – two years, possibly three, when corporations jacked up prices above and beyond the extra costs they faced, while most people were more concerned with the pandemic and later the Ukraine war.Brief it may be, but history won’t be kind if we ignore the importance of greedflation, as most economists and policymakers have done so far. Continue reading...
Decades of attempts to overcome economic blight in the region have failed. Now some say a fresh approach is neededDriving up the bigger of the two Rhondda valleys, it is hard to believe that not so long ago it was part of one of the biggest coal-producing areas in the world. The terrace houses built for the men who worked the pits are still there, but of the mines themselves nothing remains. Nature has reclaimed the spoil tips. The scars of industrialisation are hard to spot.But appearances can be deceptive. The human scarring from deindustrialisation has been deep and long-lasting. The Welsh valleys stretching north from Cardiff have low levels of employment and high levels of deprivation. Income per head is among the lowest in the UK and low pay is endemic. Continue reading...
US adds 339,000 jobs in May, surpassing forecasts, as unemployment rate increases slightly to 3.7%High interest rates, a recent banking crisis and Washington’s fight over the debt ceiling may have shaken the US economy recently, but the US jobs market continues to show signs of strength.The US Bureau of Labor Statistics (BLS) reported 339,000 jobs were added in May, surpassing forecasts that predicted the increase would be approximately 190,000 jobs and a sign of continued growth from the jobs market despite the Federal Reserve’s continuing efforts to cool the economy. Growth in the labor market has fluctuated over the last few months, dipping down to 165,000 jobs in March and coming back up to 253,000 jobs in April. The number of jobs added is still down compared with this time last year, when 390,000 jobs were added to the economy. Continue reading...
Some payday loans have interest rates as high as 664% – but now Minnesota will cap them at 36%, in line with some other statesMeka Armstrong of Detroit, Michigan, has struggled in a cycle of debt from payday loans for years. She first took out a payday loan in 2010 to cover the costs of medication she needs as she is disabled and lives with lupus.“Worst decision I ever made,” said Armstrong. “The interest rate was 49% and I thought I would get my medications and pay the money back, but when I paid the money back, it left me with nothing. That’s how they get you. I, unfortunately, started the payday nightmare, and you can’t get out of the loop.” Continue reading...
G7 sought deterrence without escalating new cold war but Beijing responded with rageAfter the May G7 summit in Hiroshima, the US president, Joe Biden, claimed that he expected a “thaw” in relations with China. Yet, despite some recent official bilateral meetings – with the US secretary of the Treasury, Janet Yellen, expressing hopes for a visit to China soon – relations remain icy.In fact, far from thawing, the new cold war is getting colder, and the G7 summit itself magnified Chinese concerns about the US pursuing a strategy of “comprehensive containment, encirclement and suppression”. Unlike previous gatherings, when G7 leaders offered mostly talk and little action, this summit turned out to be one of the most important in the group’s history. The US, Japan, Europe and their friends and allies made it clearer than ever that they intended to join forces to counter China. Continue reading...
When the economy doesn’t work in the way that theory suggests, it’s time to junk the theoryThe whisper that the government was considering price caps on food, now the biggest driver of inflation, has produced the inevitable backlash. Out scuttled mini-me Thatcherites and big business PRs waving shrouds. Ministers admitted only to looking into the idea of “voluntary” controls. But the last 15 years have shown that state intervention is considered economic heresy until it becomes politically necessary.While control of inflation is the job of the Bank of England, the government has made halving inflation this year one of the five pledges on which it wishes to be judged. Since 2008 there has been a turn away from free-market ideology, as it became increasingly clear that the economy was not working in the way textbook models had assumed. This has become obvious in the case of inflation, which mainstream economists mistakenly viewed from the vantage point of the 1970s. Seen from here, rising prices are to do with too much demand in relation to economic capacity on one hand, and too much money chasing too few goods on the other. Continue reading...
by Richard Partington Economics correspondent on (#6C01V)
Moody’s report shows weak growth across G20 as central banks move to reduce persistent high inflationStubbornly high inflation and higher borrowing costs are poised to drive the economies of the UK, Germany and US into recession, the leading rating agency Moody’s has warned.In a downbeat forecast for growth across advanced G20 economies, it said a ramping up of interest rates by central banks on both sides of the Atlantic was expected to weigh on economic growth this year. Continue reading...
Move called ‘historic’ but agreement with Australia forecast to raise Britain’s GDP by only 0.08% by 2035The UK’s post-Brexit trade deals with Australia and New Zealand have come into force, a moment lauded by the government as “historic” despite critics arguing they give away “far too much for far too little”.The trade agreements – the first of those negotiated after Britain’s EU exit to enter into force – come after George Eustice, who was the environment secretary when the UK-Australia trade pact was struck in December 2021, admitted it was “not actually a very good deal” for Britain. Continue reading...
by Rupert Jones, Phillip Inman and Kiran Stacey on (#6BZE0)
Number of residential deals down by almost 7% in a week, in echo of crisis that followed Liz Truss mini-budgetUK banks and building societies have pulled almost 800 residential and buy-to-let mortgage deals in the past few days amid growing concerns over future interest rate rises.In an echo of the crisis that engulfed the sector last autumn after the mini-budget that brought down Liz Truss, the number of residential mortgage deals has fallen by almost 7% in a week, according to figures from the financial data provider Moneyfacts. Continue reading...
British Retail Consortium says rate fell from 15.7% to 15.4% even as rise in overall shop price growth hits fresh highFood inflation in the UK fell in May, lifting hopes that the rapid increase in grocery price growth may have reached its peak after keeping the broader consumer prices index painfully high so far this year.After more than a year of sharp increases in the price of food, the British Retail Consortium (BRC) said annual food inflation eased this month from 15.7% to 15.4%, even as the overall rise in shop prices hits a fresh high. Continue reading...
The AI boom is driving demand for chips from manufacturers like Nvidia, which has seen its share price soarShares in ITV have fallen as much as 1.3% this morning to their lowest level in five months, as the broadcaster deals with the fallout of a scandal involving one of its former stars.The drop comes on the first day of trading since This Morning star Phillip Schofield quit, having admitted he lied to the broadcaster over a relationship with a younger worker. Continue reading...
Some instant access accounts as low as 0.1% despite Bank of England’s 4.5% base interest rateUK banks are paying savers “measly” rates on their cash even as the Bank of England has taken its base interest rate to the highest level in more than a decade, according to a study from the consumer group Which?.Consumers face rates as low as 0.1% for some instant access savings accounts, Which? found. Continue reading...
As costs rose yet again last week, with a warning to expect 5%-plus fixed rates, we look at the options for homebuyersWould-be and existing homeowners, looking for some sense of certainty in the mortgage market, have been left bitterly disappointed.Last week’s UK inflation figures, which showed a slower-than-expected decrease, have sparked expectations that the Bank of England will raise interest rates above 5% by the end of the year – meaning that those borrowing to buy, or renewing their mortgage, soon will face significant cost increases. Continue reading...
Campaigners for tax reform say similar levies in Europe have helped to reduce inequalityA modest wealth tax on the richest 350 families in the UK could raise more than £20bn a year – enough to fund the construction of 145,000 new affordable homes a year – according to research by fairer taxation campaigners.A 2% tax on assets above £10m held by all members of the Sunday Times rich list could raise as much as £22bn, according to analysis by Tax Justice UK, the Economic Change Unit and the New Economics Foundation (NEF). Continue reading...
Naomi Eisenstadt, first programme lead, says there is lack of attention on what childcare is actually forNaomi Eisenstadt remembers her excitement as she started as the first director of the government’s Sure Start unit in 1999.“I felt like Lyndon Johnson had run up and asked me to set up Head Start,” she says, referring to the US president’s key 1965 policy to fight the “war on poverty”. Continue reading...
Scheme would be at retailers’ discretion, says government, following talks between PM and chancellor and the food sectorMinisters are working with supermarkets to voluntarily cap the price of basic food items in an effort to ease the UK’s cost of living squeeze, but insists it is not considering imposing price caps.With food and drink prices rising at the fastest pace in more than 40 years and no let-up in sight, the Treasury and supermarkets have been discussing a possible voluntary scheme for maximum prices for certain goods. These would be likely to include essentials such as bread and milk. Continue reading...
The economic challenges of the city’s downtown have sparked speculation of a so-called ‘doom loop’. But some say its emptiness may be part of the solutionThe operator of the gondola that services Salesforce Park, an oasis among the skyscrapers in downtown San Francisco, will tell you all about how the 5-acre (2-hectare) rooftop space you’re about to enter contains 1,600 plants, 600 trees and more than a dozen ecosystems.From this far up the fortress walls, the city looks like a futuristic utopia, with office workers milling about in the sun and free yoga on Fridays. Continue reading...
Praise from the IMF and optimism on inflation have given way to echoes of last autumn’s turmoilThere was only ever an outside chance that the Conservatives would win the next general election after the tumultuous period that resulted in Rishi Sunak becoming prime minister last October. The events of the past week mean the prospect of a fifth Tory victory is now vanishingly small.Ironically, things started so well for the government. On Tuesday, the chancellor, Jeremy Hunt, luxuriated in the praise bestowed on the UK from the International Monetary Fund as it upgraded its growth forecasts for the economy. Continue reading...
As every sector counts the mounting cost of our catastrophic break with Europe, Labour must find its nerveWhat do my friends the musicians Sting, John Etheridge and Tom McGuinness (of the Manfreds) have in common, apart from music? They have recently told me they are witnessing first-hand the frustrations of Brexit: loss of the benefits of freedom of movement, and the bureaucratic damage inflicted on one of this country’s widely recognised strengths, namely the creative arts.In this they are joined by most British manufacturers and members of the hospitality industry. These are struggling to find replacements for the EU workers who have been made to feel unwelcome and have been effectively banned, or voted with their feet. All their would-be employers think Brexit is hugely damaging to their respective businesses, and would like to reverse it. Continue reading...
Austerity, Brexit and catastrophic fiscal decisions have inflicted long-term damage to Britain’s productive capacity. Labour is offering the renewal it so badly needsIt has been a week of bad economic news. The latest data from the Office for National Statistics confirmed that inflation has fallen in the UK, but to 8.7%, slightly higher than had been predicted. This triggered a strong reaction in the bond markets, pushing up the cost of government borrowing to almost the same as it was in the wake of Kwasi Kwarteng’s mini-budget that tanked the markets last September.It is a sobering reminder of the lasting legacy of Liz Truss’s brief premiership. In just 49 days, she and her chancellor undermined long-term investor confidence to the extent that the UK government, once able to borrow at interest rates of almost zero, now faces some of the highest borrowing costs of developed nations, with these costs liable to rise even further as a result of only moderately bad economic news. It means that for the first time in decades, the UK is subject to the same sorts of external market pressures on its investment, tax and spending decisions as much less affluent economies. Continue reading...
A deal between the White House and US House speaker has been agreed in principle, but still needs to pass a divided US congressJoe Biden and the House Republican speaker, Kevin McCarthy, have reached a deal “in principle” to raise the federal government’s $31.4tn debt ceiling, potentially averting an economically destabilising default on 5 June.With any new agreement still required to pass through a divided Congress, the risk that the Treasury department runs short of money to cover all its obligations does however remain. Continue reading...
by Jedidajah Otte and Guardian readers on (#6BYCN)
Readers reveal how they have spent their time since retiring – be it helping with childcare, renting property, gardening or worrying about the futureBarbara was 59 when she decided she’d had enough of working. The former chief executive of a multi-academy trust, now 63, had always wanted to retire early, but didn’t think she could afford to.“I was quite burnt out and desperate to change my lifestyle. I worked 70 hours a week for years – it was just exhausting,” she says. “I was lucky to have a good pension, but also quickly realised that when you retire, you just don’t need as much money. All the activities that I do – my walking group and book group – they don’t cost anything.” Continue reading...
The once humble, low-cost staple more than doubles in price, putting many fish and chip shops at riskWhether it’s fried, baked or mashed, potatoes have traditionally been a low-cost staple food in the UK – but not any more.A surge in costs is clobbering high street chippies, while in the supermarket, oven chips and the once humble baking potato are casualties of soaring grocery prices. Continue reading...
Former culture secretary says prime ministerial diaries ‘are frequently wrong’The government has announced that £7m is now available for grants to fund “policy-relevant research on how the conservation and sustainable use of biodiversity can help address climate change and improve livelihoods of some of the world’s most vulnerable populations”. The money is available from the Global Centre on Biodiversity for Climate, set up by the UK government with £40m funding at the Cop26 climate summit.Railway catering workers have voted to strike in a dispute over pay, PA Media reports. PA says:Members of the Rail, Maritime and Transport union (RMT) employed by DHL, which provides catering services for Avanti trains, backed industrial action by 97% on a 66% turnout.The union said the workers had not been offered a pay rise despite the cost of living crisis.This is a fantastic ballot result for our members, and it is now time for DHL and Avanti to make an offer on pay.It is insulting that our members have not been offered anything despite the fact both DHL and Avanti are highly profitable. Continue reading...
by Kalyeena Makortoff, and Kate Connolly in Berlin on (#6BX19)
Updated data shows economy went into reverse in first quarter with GDP falling by 0.3%Germany has entered a recession, revised official figures have revealed, after high prices took a bigger toll on the country’s economy than originally estimated.Data from the Federal Statistical Office showed Europe’s largest economy contracted by 0.3% in the first quarter of 2023, compared with the previous three months, when it shrank by 0.5%. The technical definition of a recession is two consecutive quarters of contraction. Continue reading...
Lenders forced to raise fixed-term deals after latest inflation figure pushed swap rates upwardsHouseholds looking for a new mortgage deal have been warned to expect 5%-plus fixed-rate deals in the coming weeks, after Wednesday’s inflation figures sent the money markets back into turmoil.Nick Mendes, the mortgage technical manager at the broker John Charcol, said on Thursday that he doubted there would be any two-year fixed-rate mortgages and probably few five-year deals priced at less than 5% in the coming weeks, as lenders are forced to reprice their mortgages upwards. Continue reading...
Boris Johnson letter complains process is ‘unfair’ towards him and confirms he is asking new lawyers to represent him. This live blog is closedAnd here is Suella Braverman’s apology, from her letter to Rishi Sunak. She says:I am deeply committed to all the Nolan principles of public life, including honesty, integrity and openness, and I regret that these events have led some to question my commitment. I have at all times been truthful and transparent, and taken decisions guided by what I believed was right and appropriate given my office, not by any personal motivation. Another principle, of course, is leadership: ministers must hold themselves – and be seen to hold themselves – to the highest standards. I have always strived, and will continue to strive, to do this.As I say, in hindsight, or if faced with a similar situation again, I would have chosen a different course of action. I sought to explore whether bespoke arrangements were possible, given my personal circumstances as a security-protected minister. I recognise how some people have construed this as me seeking to avoid sanction – at no point was that the intention or outcome. Nonetheless, given the fundamental importance of integrity in public life, I deeply regret that my actions may have given rise to that perception, and I apologise for the distraction this has caused.Thank you for your letter and for your time discussing these matters with me.Integrity, professionalism and accountability are core values of this government and it is right and proper that where issues are raised these are looked at professionally to ensure the appropriate course of action is taken. Continue reading...
LSE researchers estimate that extra barriers on EU food imports have pushed up bills by £250 on averageBritish households have paid £7bn since Brexit to cover the extra cost of trade barriers on food imports from the EU, according to researchers at the London School of Economics (LSE).The university’s latest report estimating the impact of leaving the bloc on UK food prices found that trade barriers were consistently hampering imports, pushing up bills by an average £250. Continue reading...
The shadow chancellor has a vision for social democracy in an age of economic shocks and uncertainty – New Labour this isn’tThe mythology of political history insists that politicians’ speeches are important. A lifetime in political journalism tells me different. Political speeches have got to be made, and some politicians are good at them – Michael Heseltine, the best I have ever heard – but most speeches are events of the moment. They are decorative, not determinative. Most do not matter much and are rightly forgotten, even the good ones.There are, though, occasional exceptions. Rachel Reeves’ speech to the Peterson Institute in Washington DC on Wednesday has a claim to be one of those with a longer shelf life. Not because it was an oratorical tour de force stuffed with smart lines. It wasn’t. Some of Reeves’ terminology, such as her embrace of what she calls “securonomics”, is a distracting barrier to understanding what is otherwise a key idea. But that’s a small point. This speech matters a lot. It matters because the ideas and commitments it contains are serious – and because it addresses something indisputably important.Martin Kettle is a Guardian columnist Continue reading...
Rolling, live coverage of business, economics and financial markets as consumer price index inflation reaches 8.7%, well above forecastsUK inflation dropped to 8.7% in the year to April, the first time it has dropped below 10% since August and the lowest since March 2022.Yet that steep fall – long expected because of the big increase in energy prices in April 2022 – has not all been happy news. It was less dramatic than expected by economists.Sugar 47.4%Olive oil 46.4%Eggs 37%Low-fat milk 33.5%Cheese and curd 30.6%Flours and other cereals 30%Pasta products and couscous 27.7%Ready-made meals 20.8%Butter 20.1%Bread 18.6%Jams, marmalades and honey 17.9%Fish 14.2%Pizza and quiche 11.9%Fruit 10.8%UK inflation has come in higher than pretty much anyone, including members of the Bank of England’s committee, expected in April.This undoubtedly makes life harder for policymakers and no doubt raises the chance of yet another 25bp rate hike in June. Continue reading...
In today’s newsletter: It’s good news – but the figure is still a bit higher than expected, even as energy costs decline. As the latest data is released, we look at its ongoing impact – and what it means for you
UK ministers will use improved forecast to claim plans are working – but IMF also urged more action to protect vulnerable peopleJeremy Hunt was quick to welcome the International Monetary Fund’s improved economic forecasts. Britain was now on track for the lowest rate of growth outside a recession in the postwar era. Still, it was a “big upgrade” from the Washington-based fund compared with a month ago, the chancellor said.In its annual article IV health check on the British economy, the IMF said it expected gross domestic product to grow by 0.4% this year, tearing up its estimate in April of a 0.3% contraction. Continue reading...