Capital Markets Corporate

January 15, 2021

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

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Cut UK interest rate below zero to aid growth, says Bank policymaker 

Cutting the UK’s official interest rate below zero would be good for growth and could be done without crippling commercial banks, according to Bank of England policymaker Silvana Tenreyro. When speaking to the University of the West of England, Tenreyro pointed towards the success of introducing negative interest rates in other countries and rejected the argument that the profitability of banks would be adversely affected if the official cost of borrowing fell below 0.1%. (From The Guardian, 11 January 2020)

Self-employed credit crunch a signal that the property market set to be a rocky road  

While the property market has remained open so far during this lockdown, the mortgage market has contracted in recent weeks as banks fear the economic implications of fresh restrictions and the possibility of a triple-dip recession. The self-employed are again locked out and experiencing a credit crunch similar to the conditions of the first lockdown as they face having to put down higher deposits, with one lender demanding 40% upfront. Some banks are now automatically declining lending to anyone who has claimed support from the government. (From The Telegraph, 12 January 2020).

Savers seek higher returns amid low interest rates  

Reductions in rates for the Government-provided National Savings & Investments accounts are prompting savers to withdraw money and move it into equity markets and building society accounts in search for higher returns. Data shows £6.2bn was taken out of NS&I accounts in November alone, reflecting savers’ appetite for riskier assets in a low interest rate environment. Wealth and asset managers have warned savers inexperienced in investing in stocks to be mindful of possible scams that could leave them exposed to high losses. (From FT, 8 January 2021)

Banks return to high LTV market 

High-street banks are returning to the higher loan-to-value market as they increase their exposure to riskier borrowers. HSBC is bringing back 10% deposit mortgages after pulling out of the market because of overwhelming demand. An increase in the supply of high LTV mortgages will support activity in the housing market by stimulating demand among first-time buyers. This group tend to have access to lower value deposits, meaning they typically need larger loans to finance home purchases. (From The Times, 9 January 2021)

DB activity in 2020 traces pandemic lockdowns  

Reductions in defined benefit transfer activity traced government lockdowns, according to research from consultants Lane Clark and Peacock. January and February had the highest concentration of DB transfer request activity in 2020, the months just before the first lockdown was implemented. Lower DB transfer requests during lockdown months may have been driven by consumers placing greater value on the security these schemes provide. Many households have weathered severe pressure on finances during the pandemic, possibly prompting them to keep DB schemes intact to lock-in guaranteed retirement income in later life. (From Money Marketing, 12 January 2021)

 

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