FTSE 100 Live: Chancellor and banks agree mortgage support; City sees 6.25% interest rates
onsumers are showing signs of resilience after figures today revealed retail sales rose in May.
A separate report by GfK also highlighted optimism on personal finances despite rising mortgage costs and stubborn inflation.
For investors, meanwhile, there was little to cheer today as European markets continue this week’s downbeat performance.
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FTSE ends tough week at 7,461.87
The FTSE 100 closed at 7,461.87, down 2.4% for the week.
Stocks fell further today after declines earlier in the week due to higher-than-expected inflation and a half-point interest rate rise.
Ocado was the biggest faller, after a huge rise yesterday on the back of takeover rumours.
What do the mortgage measures agreed on Friday mean for struggling borrowers?
Under-pressure mortgage borrowers have been offered some potential relief as Chancellor Jeremy Hunt and major banks agreed measures on Friday to help ease the pain of rising rates.
Here is a look at what this means for people who are struggling with their mortgage payments:
Heathrow security strikes averted by new pay deal
A long-running dispute involving security officers at Heathrow Airport has ended after workers voted to accept an improved pay offer.
More than 2,000 security officers at Heathrow Terminals 3 and 5 and campus security were due to take 31 days of strike action throughout the summer, but talks resumed which Unite said led to an improved pay offer.
The union said workers will receive an increase of between 15.5% and 17.5%.
The Standard View: Mortgage relief plans are fraught with danger
In politics there are bad ideas, then there are really terrible ideas and, finally, there are mortgage relief schemes at a time of soaring inflation.
Such a policy would, as Chancellor Jeremy Hunt himself has admitted, make the current situation “worse, not better”. And yet, opportunists can sense their moment.
Jeremy Hunt agrees measures with banks aimed at cooling mortgage crisis
Chancellor Jeremy Hunt has agreed measures with lenders aimed at helping mortgage holders struggling with high interest rates but has resisted offering Government support.
After summoning banks and building societies to Downing Street to help quell the crisis, Mr Hunt said they agreed to implementing a 12-month minimum before repossessing homes.
Boxpark wins planning permission for Boxhall City food hall at Liverpool Street
“Pop-up mall" operator Boxpark has won planning permission to open Boxhall City, its first London food hall at the Metropolitan Arcade building near Liverpool Streetstation.
The site, set to open in summer 2024, would include 16 pop-up restaurants. Boxpark CEO Simon Champion told the Standard his team would scour London street food markets to find vendors.
Champion said:: “We are delighted to receive the news today that Boxhall City has planning approval, as we aim to revive the Metropolitan Arcade building whilst retaining its unique character. Our team has worked extremely hard to secure this incredible central location in the City, and we are very excited about creating an all-day social dining destination to cater for hungry City workers, local residents in the neighbourhood, as well as attracting tourists and helping to drive footfall into the area.”
City voices: It’ll take a recession to beat inflation
“Events this week have bolstered my view that high inflation won’t disappear on its own,” writes Paul Dales of Capital Economics.
“Yesterday’s 0.50% rise in interest rates from 4.50% to 5.00% shows that the Bank of England is realising this.
“Even so, I suspect the Bank will have to generate a recession to break the back of inflation.”
Market snapshot as short-dated gilts surge past Monday’s 15-year high
Two-year gilts surged past the levels reached on Monday to a new 15-year high.
That comes as City traders up their bets on interest rates peaking at 6.25% or even 6.5% by early next year,, which is now seen as a greater than three-in-five possibility.
Take a look at all the key market data
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Short-dated gilt recovery erased
Two-year gilt yields fell back down tin early trading, in a move thhat would appear to calm mortgage holders whose fixes are soon to expire, but a late-morning surge has taken yields back towards 15-year highs once again.
The two-year gilt was yielding 4.93% around two hours ago, but traders have sold again on the back of the latest PMI figures, sending yields back towards 5.08%.
That could mean more pain for mortgage holders, as the gilt market is typically used to price fixed-rate deals.
Private sector growth slower than expected in May
The UK private sector grew in May, but more slowly than expected, according to a closely watched indicator.
The S&P Global / CIPS Flash UK PMI came to 52.8 in May, below April’s figure as well as economists’ expectations. Any figure above 50 represents growth.
The services sector continued to grow, albeit more slowly, while manufacturing’s decline continued.
Dr John Glen, CIPS Chief Economist said: “Recent interest rate rises will also add more stress on business investment. In the manufacturing sector, new orders fell again for another month, marking a year of shrinking workflows. Customer spending in the second half of 2023 is likely to shrink further as concerns over the UK economy gather pace with stretched affordability rates amongst consumers and businesses alike.”