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UK mortgage rates jump again
Oof! Average UK mortgage rates have jumped this morning.
Data provider Moneyfacts has reported that the average 2-year fixed residential mortgage rate has risen to 5.20% today, up from 5.10% on Friday. It was just 4.84% on the eve of the US-Israeli war on Iran last month.
The average 5-year fixed residential mortgage rate today is 5.25%, up from 5.19%.
That reflects rising expectations in the City that the Bank of England will not cut interest rates this year, and is likely to raise from back to 4% (from 3.75%) today by summer 2027.
[although, as flagged earlier, Goldman Sachs still expect two rates cuts this year].
Moneyfacts also shows a drop in the number of residential mortgages on the market – down to 6,972 today, from 7,106 at the end of last week.
Key events
UK government borrowing costs are dropping, which should cheer chancellor Rachel Reeves.
With bond prices rising, the yield (or interest rate) on two-year, 10-year and 30-year UK bonds are all dropping.
The benchmark 10-year gilt yield is down 8 basis points (0.08 percentage points) to 4.73%, as the drop in the oil price today soothes some concerns about inflation.
Ths dip in oil prices today is supporting stocks, reports Joe Mazzola, head trading & derivatives strategist at Charles Schwab:
“After a third straight weekly drop pushed the S&P 500 Index to nearly four-month lows, investors face several central bank meetings, an Nvidia (NVDA) conference, and earnings from chip giant Micron (MU) in coming days. So naturally, Wall Street focused this morning on crude oil prices and the war in the Middle East.
Stocks edged up early as crude slipped, though investors might want to remember that recent rallies often faded.”
Oil now falling
Happy news in the fight against Trumpflation – the oil price is dropping.
Brent crude, the international benchmark, is now down 2.2% this session at $100.87 a barrel.
US crude is dropping faster; down 4.7% today at $94 a barrel.
This follows the resumption of some oil loading at the UAE’s port of Fujairah today after a damaging drone attack.
Wall Street’s main indexes have opened higher at the start of the new week, despite the ongoing conflict in the Middle East.
The Dow Jones Industrial Average has gained 329 points, or 0.7%, in early trading to reach 46,887 points. Tech stocks are rallying, with Nvidia up 2.3% and Salesforce rising by 2.2%.
The broader S&P 500 index is up 1%.
The body that advises the world’s central banks has urged policymakers not to overreact to the Iran crisis-driven spike in global energy prices.
The Bank for International Settlements (BIS), which is known as the “bank for central banks”, said the current surge in oil and gas prices was a textbook case of when to “look through” a shock.
In its latest report, BIS urged central bankers to show caution.
BIS economic advisor, Hyun Song Shin, explained:
“If it’s a supply shock, and certainly if it’s a temporary one, these are the textbook examples where you should look through and not react with monetary policy.”
Trumpflation is being driven by the oil price, which has surged since the Iranian war began.
Brent crude oil has surged 42% while WTI (US crude) is 47% higher in the two weeks after the strikes, Deutche Bank point out in a research note today.
But apart from oil, and commodities, every other asset in their regular chart is down since the strikes began:
Deutsche Bank told clients:
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On a relative basis, US assets have fared better, reflecting their more limited exposure to any oil shock as a net exporter. So, in total return terms the S&P 500 is down -4%, whereas the STOXX 600 is down -6% (and -9% in USD terms).
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Sovereign bond yields have also spiked sharply. For US Treasuries, the 2yr and 10yr yield are each up +34bps. Meanwhile 2yr German yields are up +44bps, and the 10yr yield is up +34bps, closing at a post-2011 high of 2.98% on Friday.
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Similarly for sovereign bonds, US Treasuries are down -2%, and Euro Sovereigns are down -6% in USD terms.
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If we drill down into the different sectors, all the big sector groups in the S&P 500 have lost ground, with the clear exception of energy (+3.2% in total return terms).
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Interestingly, tech has the strongest sectoral performance after energy, only down -1.2% since the strikes.
TUC: more help needed to stave off ‘Trumpflation’
TUC General Secretary Paul Nowak has also welcomed Keir Starmer’s announcement of £53m of support for households who use heating oil, but warned that more help will be needed to protect the UK from ‘Trumpflation’:
“Working people are being hit with a Donald Trump-made cost of living crisis. It’s right that the Prime Minister has acted quickly to support those most acutely affected by rising energy prices.
“This illegal war and ongoing chaos will continue to threaten living standards. More support will likely be needed to stave off ‘Trumpflation’.
“The Prime Minister is right to call for rapid deescalation in the Middle East. The Government must stand ready to pull out all the stops and shield households and firms from this global shock.”
Building materials group CRH to delist from London Stock Exchange.
The City is losing one of its bigger names, with building materials group CRH announcing it will delist from the London Stock Exchange.
The move comes two and a half years afer CRH, which is valued at £50bn, moved its primary stock market listing to the US from London.
CRH attributes the decision to the level of trading activity for its ordinary shares on the LSE as well as the additional cost, regulatory and administrative obligations arising from retaining the LSE listings.
Susannah Streeter, chief investment strategist at Wealth Club, says:
“The delisting of CRH isn’t a complete surprise, given that it had already switched its main listing to New York and three quarters of its profits are reliant on its operations in North America. However, with yet another big name heading Stateside, it will still be a significant blow to the London Stock Exchange.
It comes after a flurry of other companies have taken flight from the UK to seek greater fortune under a New York listing. At the same time, there has also been a trend of global giants swallowing big fish from the UK pond, with acquisitions such as Schroders by Nuveen still front of mind. Each high-profile departure shrinks the UK’s listed market and reinforces the perception that companies are finding deeper pools of capital and higher valuations across the Atlantic.
Oil dips after loading resumes at UAE’s Fujairah port after drone attack
The oil price has dropped back, following reports that oil loading operations have resumed at the United Arab Emirates port of Fujairah after a drone attack.
Exports from Fujairah were disrupted after the attack triggered a fire in the emirate’s petroleum industrial zone, but Reuters reports that operations have now resumed.
Civil defense teams were working to control the blaze, the Fujairah government media office said in a statement, adding that no casualties were reported.
Greenpeace have welcomed the UK government’s pledge of support for those on heating oil, while emphasising the need to shift off fossil fuels.
Paul Morozzo, senior climate campaigner for Greenpeace UK, says:
“Households dependent on heating oil are at the sharp end of Trump’s chaotic war on Iran, which has rapidly pushed up the price of oil and gas.
It’s vital for the government not to abandon people to the profiteering suppliers of volatile fossil fuels, but while citizens can be protected to some extent the UK will still be paying inflated prices, even if it’s on our taxes rather than our bills. The only way to achieve long-term stability in energy prices is to get off the fossil fuel rollercoaster and accelerate the transition to clean, homegrown energy sources we can control.”
UK government to spend £53m helping rural communities with rising cost of heating oil
Sir Keir Starmer has announced £53m of support for rural communities to help with the rising cost of heating oil.
At a press conference this morning, the prime minister said energy companies should not profit from price rises caused by the war, and reassured households that the planned fall in the energy price cap from April to June will take place.
And on heating fuel, he says:
The CMA [Competition and Markets Authority] reported last week what every heating oil customer already knows. There are accounts of suppliers cancelling orders and jacking up prices. Now that kind of conduct is completely unacceptable. So if the companies have broken the law there will be legal action.
Because it’s clear this market is under regulated, we’re going to put that right to ensure customers get a better deal.
But we won’t just wait for that. I’m announcing immediate support for vulnerable heating oil customers today, providing £53m for those households that are most exposed.
Our Politics Live blog has full coverage of the press conference, where Starmer is being quizzed about the Iran war
UniCredit launches ‘unfriendly’ takeover bid for Commerzbank
Alex Daniel
Two European banking powerhouses have become embroiled in a €35bn (£30bn) takeover battle after Italy’s UniCredit stepped up its long-running pursuit of German lender Commerzbank, despite strong opposition from the German government.
UniCredit first took a stake of 9% in Commerzbank in September 2024 and has since built up its holding to just under 30%. It said on Monday it was pushing to increase that holding further and push the rival lender into formal merger talks.
Under German law, a shareholder that has a more than 30% stake is required to make a takeover bid. The Milan-headquartered bank said on Monday it was planning a share swap that would imply a €30.8 price per Commerzbank share, or about €34.7bn in total. Commerzbank’s share price rose to €31.30 on Monday in early trading.
UK mortgage rates jump again
Oof! Average UK mortgage rates have jumped this morning.
Data provider Moneyfacts has reported that the average 2-year fixed residential mortgage rate has risen to 5.20% today, up from 5.10% on Friday. It was just 4.84% on the eve of the US-Israeli war on Iran last month.
The average 5-year fixed residential mortgage rate today is 5.25%, up from 5.19%.
That reflects rising expectations in the City that the Bank of England will not cut interest rates this year, and is likely to raise from back to 4% (from 3.75%) today by summer 2027.
[although, as flagged earlier, Goldman Sachs still expect two rates cuts this year].
Moneyfacts also shows a drop in the number of residential mortgages on the market – down to 6,972 today, from 7,106 at the end of last week.
Houmous and pet grooming added to UK inflation basket
Houmous, alcohol-free beer, pet grooming, motorhomes and dashboard cameras have all been added to the basket of goods used to track UK inflation.
The Office for National Statistics has decided to include these items, as part of its regular adjustment to the products it tracks to measure the cost of living.
To make space in the virtual basket, bottled premium lager bought in pubs and restaurants have been ejected. The ONS will also ditch sheets of wrapping paper in favour of rolls of wrapping paper, which are easier to track.
Tell us: has the conflict in the Middle East affected your household or business costs?
We’d like to hear from people in the UK who have seen the cost of goods or services increase or experienced delays, cancellations or other disruptions…..
Goldman Sachs are still predicting the Bank of England will cut interest rates this year.
In their baseline forecast, Goldman economists see the next rate cut in July, followed by further quarter-point cuts in November and February, bringing Bank rate down to 3%.
That’s at odds with the money markets, which are indicating rates will rise back to 4%, from 3.75% today, next year.
Like pretty much everyone else in the City, it seems, Goldman also expect the Bank of England to hold Bank Rate unchanged at Thursday’s meeting.
They predict a 7-2 vote split – with policymakers Swati Dhingra and Alan Taylor preferring a 25bp rate reduction.
Goldman predict:
The minutes will probably acknowledge that the latest energy futures prices suggest that headline inflation is likely to remain above target for longer than previously expected, while stressing that the path ahead is highly unpredictable. We think that the Committee will indicate that it is alert to the possibility of second-round effects and will likely assess that the risk of persistence in underlying inflation has increased. That said, we expect the minutes to reiterate that risks remain two-sided given continued labour market weakness.
We expect the Committee to refrain from offering a strong steer on the near-term policy outlook, noting that in the current context of elevated uncertainty it will decide the appropriate degree of restriction at each meeting. But we think that the guidance will indicate that additional policy easing remains likely if energy prices fall back.
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