UK mortgage approvals edge lower, consumer lending robust

LONDON, (Reuters) – Britain’s housing market and consumer economy kept most of their momentum last month, lending figures from the Bank of England showed on Monday, leaving the central bank on track to raise interest rates for the first time in more than a decade on Thursday.

A crane is seen above some high rise building construction works at Lewisham, in London, Britain October 10, 2017. REUTERS/Afolabi Sotunde

The number of mortgages approved for house purchase fell to a three-month low in September at 66,232 from an upwardly revised 67,232 in August, slightly above economists’ average forecast for it to slip to 66,050 in a Reuters poll.

The growth rate in unsecured consumer lending nudged down to 9.9 percent on a year-on-year basis in September from 10.0 percent in August, matching July’s growth.

In cash terms, net consumer lending rose by 1.606 billion pounds last month, a fraction above the highest forecast in a Reuters poll.

Last month the BoE said British lenders needed to hold an extra 10 billion pounds of capital to guard against consumer loans going sour, as it was concerned that banks had overestimated the creditworthiness of their borrowers.

Government data on Friday showed that personal insolvencies rose to a five-year high in the third quarter.

Official data last week showed an unexpected pick-up in gross domestic product growth to a quarterly rate of 0.4 percent in the third quarter – still well below its long-run trend, but an improvement after the weakest first half since 2012.

Moreover, with inflation at a five-year high of 3.0 percent and unemployment at its lowest in more than 40 years, the BoE looks on track to raise interest rates on Thursday for the first time since 2007, reversing a rate cut made in August 2016.

The initial impact of raising rates back to 0.5 percent – their level for seven years until August 2016’s rate cut – may be muted for most Britons.

Less than 30 percent of households have mortgages, and 60 percent of these are fixed-rate, compared with just 30 percent 15 years ago. For the average borrower with a variable rate mortgage, interest payments will rise by 180 pounds ($ 237) a year if rates return to 0.5 percent, according to mortgage lender Nationwide.

Mortgage lending, which lags behind approvals, rose by 3.848 billion pounds in September and is 3.2 percent higher on the year. Mortgage and consumer lending combined is up 4.0 percent.

Britain’s housing market has slowed since June 2016’s vote to leave the European Union, especially in London and neighbouring parts of England.

Reporting by David Milliken and Andrew MacAskill

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HSBC hit by second online banking outage in four days

LONDON (Reuters) – HSBC (HSBA.L) suffered its second online banking outage in four days in Britain on Monday, as customers complained on social media that they could not log in.

FILE PHOTO: The HSBC bank logo is seen at their offices in the Canary Wharf financial district in London, Britain, March 3, 2016. REUTERS/Reinhard Krause/File Photo

HSBC said it had resolved the problem, which lasted around 30 minutes and was due to a temporary technical issue.

HSBC customers had also said on Friday they were unable to access online accounts, when many were expecting pay cheques.

The bank said that disruption was caused by a scheduled upgrade which failed to complete properly.

Disruption to online and mobile services has become more of a problem for banks in recent years, as lenders cut branch networks and steer customers towards those digital platforms.

Reporting by Lawrence White; editing by Alexander Smith

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UK consumer confidence slips in October – GfK

LONDON, Oct 31 (Reuters) – British consumers turned slightly more gloomy in October as they remained downbeat about the economy, although they continued to splash out on major purchases, a survey showed on Tuesday.

FILE PHOTO: Men’s hair and grooming products are seen on display for sale at a barber shop in London, Britain, October 12, 2017. REUTERS/Toby Melville/File Photo

The monthly consumer sentiment index from market research firm GfK eased to -10 this month from -9 in September, matching the consensus from a Reuters poll of economists, and continued to hover near a three-year low.

The survey has shown little change over the past five months and the latest reading will probably do little to alter the analysis of Bank of England policymakers meeting this week to set interest rates.

Economists polled by Reuters expect the BoE will raise rates this Thursday for the first time in more than 10 years.

“As concerns about the wider economic prospects for the UK economy dampen our outlook, consumers are showing no real ‘get-up-and-go’,” GfK analyst Joe Staton said..

Nonetheless, consumers’ appetite for spending on big-ticket items inched up to a five-month high, GfK said.

“Our enthusiasm for spending … is more worrying than reassuring,” Staton said.

“Surging credit card use is fuelling spending at the expense of our appetite for saving, which is growing at the slowest rate since the start of the 2008/2009 financial crisis.”

BoE data on Monday showed that unsecured consumer lending continued to rise at an annual rate of close to 10 percent in September.

Last month the BoE said British lenders needed to hold an extra 10 billion pounds of capital to guard against consumer loans going sour, as it was concerned that banks had overestimated the creditworthiness of their borrowers.

GfK carried out its survey between Oct. 1 and Oct. 15 on behalf of the European Commission, and polled 2,043 Britons.

Reporting by Andy Bruce, editing by David Milliken; andy.bruce@thomsonreuters.com; +442075423484; Reuters Messaging: andy.bruce.thomsonreuters.com@reuters.net

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Bank of England's Cunliffe – no clear case for rate hike soon

LONDON (Reuters) – Bank of England Deputy Governor Jon Cunliffe said on Thursday it was not clear that interest rates needed to rise soon, showing at least two of the central bank’s nine policymakers are unlikely to vote for a hike in November.

Britain’s Deputy Governor of the Bank of England Jon Cunliffe speaks during the Bank of England’s financial stability report at the Bank of England in the City of London, Britain June 27, 2017. REUTERS/ Jonathan Brady/Pool

Cunliffe told BBC radio he did not see signs of sustained upward inflation pressure.

READ: MPs voice worry over Bank of England’s lack of diversity

On Tuesday, one his new colleagues Dave Ramsden said he was not part of the majority of BoE rate-setters who thought that a rate hike was likely to be needed in the coming months.

Another member of the Monetary Policy Committee, Silvana Tenreyro, said on Tuesday her support for that position was “very contingent on the data”.

Cunliffe said the British economy was growing and unemployment was falling. “But we are not seeing pay pressure and for me we are not seeing sustained signs of domestic inflation pressure,” he said in an interview on BBC Radio Wales.

“The inflation we have is coming from abroad from that depreciation (of sterling after the Brexit vote).”

ANALYSIS: BoE’s “unreliable boyfriend” needs to get message right

Sterling extended losses against the U.S. dollar after Cunliffe’s comments.

He said the Bank’s August forecasts were for economic growth to continue over the next three years and for pay to start to increase over the period, putting upward domestic pressure on inflation.

“If that forecast – it was our best assessment in August – came to pass, I am very clear interest rates will need to rise slowly and gradually over the period. When that process should actually start, I think, is a more open question,” he said.

Britain’s economy has slowed this year, hurt by the rise in inflation since the 2016 Brexit vote and uncertainty about the country’s future trading ties with the European Union.

Even so, the Bank said last month that most of its rate-setters expected to increase borrowing costs in the coming months, partly because Brexit would lead to higher inflation.

As of Thursday’s close in British fixed income markets, investors were pricing in a roughly 80 percent chance that a first 25 basis-point hike will come on Nov. 2, after the Bank’s next policy meeting.

Most economists polled by Reuters last month said they expected a rate hike in November, but a majority also said it would be a mistake to raise borrowing costs at this time.

George Buckley, an economist with Nomura bank, said on Thursday he had surveyed 80 of its clients. Forty-two percent said a BoE hike now would probably be a mistake, against 58 percent who thought it would not.

Reporting by Andy Bruce, editing by William Schomberg

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UK watchdog tells EU not to disrupt funds industry

LONDON (Reuters) – The long-established practice of funds in one country being run by managers based in another works well and no changes are needed, Britain’s top markets regulator said on Tuesday in a swipe at European Union plans that have also been criticised by the sector.

Britain is home to about a third of assets under management in the EU, with around 8 trillion pounds in assets. Investment managers in Britain manage just over a trillion pounds on behalf of overseas authorised funds, mostly listed in Luxembourg or Dublin.

“This requires co-operative arrangements which are well established,” Financial Conduct Authority Chief Executive Andrew Bailey told the Investment Association annual dinner in London on Tuesday.

“Let’s not beat about the bush, this model works – it works well for investors and for investment managers. So, why disrupt it, or put another way, must it be disrupted?”

  The bloc’s markets watchdog, the European Securities and Markets Authority (ESMA), has issued guidance for national regulators receiving licence requests from asset management firms in London wanting to open hubs in the bloc after Britain leaves the EU in 2019.

The guidance says that such hubs must have “substance”, meaning they should employ senior staff and not be just “letter box” entities with all big decisions taken back in London.

Asset managers see this as disrupting the cross-border operation of funds, also known as delegation, a principle applied across the world, with asset managers in the United States and Asia running funds in the EU.

Bailey said the FCA was not the only regulator asking this question – supervisors in Luxembourg have also stated that existing EU rules on delegation were already strict and no further strengthening of them is necessary.

“Does it require membership of the EU to make this system work? No, it does not,” Bailey said.

“We are ready to roll our sleeves up and continue to make open markets work effectively.”

Meanwhile, the FCA is putting pressure on asset managers in Britain to show on an annual basis how they are giving investors “value for money”, including greater transparency on fees and performance objectives.

The watchdog is working on a common fee “template” that funds would complete.

“And we want to continue the dialogue on value for money, and on what questions we should all be asking to assess whether what’s being delivered does represent good value,” Bailey said.

“We do not, for instance, want to incentivise short termism or fail to recognise the value of effective stewardship.”

Separately on Tuesday, ESMA announced that it too was starting a broad study into costs and fees charged by EU regulated mutual funds known as UCITS.

Reporting by Huw Jones, editing by David Evans

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Millions of Britons in financial difficulty

LONDON (Reuters) – Over four million people in Britain are having difficulties paying their monthly bills, the Financial Conduct Authority (FCA) said on Wednesday, at a time when inflation is rising and interest rates may follow.

The financial regulator said that younger consumers and renters were among the most financially stretched, with those in difficulty defined as having failed to pay bills in three or more of the last six months and most likely to be in the 25-34 age range.

The survey of 13,000 people, showed that nearly half of renters said they would struggle to meet a rent rise of less than a hundred pounds a month.

This comes at a time when consumer credit has grown at rates that have raised regulatory concerns, and the Bank of England has signalled that an interest rate rise may be on the cards as inflation climbs to 5-1/2 year highs.

Wage growth in Britain continues to lag behind inflation, eroding consumers’ ability to pay rising bills.

“We are in a situation where it’s fair to say that there is a significant group of people who have never experienced a rise in interest rates,” said Chris Woolard, the FCA’s executive director of strategy and competition.

FILE PHOTO: Smiling Union Jack piggy banks are lined up for sale in the window of a souvenir store on Oxford Street in central London January 20, 2014. REUTERS/Andrew Winning/File Photo

“It does expose the scale of those in difficulties in the younger generation.”

The “Financial Lives” survey said that half of UK consumers, or 25.6 million people, were potentially vulnerable to any personal financial shock.

“These findings confirm the scale of the financial issues that millions of people in the UK face, with 27 percent of UK adults just ‘surviving’ and at risk of falling into difficulty if their circumstances change,” said Joanna Elson, chief executive of Money Advice Trust, which runs a national debt helpline.

The FCA has been tasked with tackling high interest rates charged on some consumer credit loans, and is due to propose changes.

“This is a story half done. There is still more for us to do, more for industry to do,” Woolard said.

The FCA will use information from the survey to shape rules in consumer credit, mortgages and other sectors.

Reporting by Huw Jones; Editing by Elaine Hardcastle

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