Key events 18m ago Starmer: November statement ‘far too long off’ to review tax cuts 31m ago UK house prices could fall 10% to 15%, warn analysts and brokers 41m ago Gilt yields hover at highest level since 2008 financial crisis 1h ago Introduction: Pound slumps after IMF urges UK to reconsider tax cuts Filters BETA Key events ( 4 ) UK ( 4 ) Keir Starmer ( 3 ) 4m ago 08. 16 Starmer is now on BBC radio 4’s Today programme, talking about the IMF criticism of the UK’s tax cuts, a rare intervention by the Washington-based fund, and the market turmoil. .
css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} It reflects the fact that the government has completely lost control of the economy. This is a government that has lost control of the economy and for what? To give tax breaks to those earning hundreds of thousands of pounds whilst working people have to pay more in prices.
It’s the worst of all situations for our country to find itself in. 18m ago 08. 02 Starmer: November statement ‘far too long off’ to review tax cuts Sir Keir Starmer , the Labour leader, said his own variable rate mortgage has gone up by a few hundred pounds.
He told LBC radio this morning: . css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} So many people with mortgages will be really worried by what’s going on because they know what this means for their their budgets – prices are going up.
We all look at the graph and we see the pound falling, but it’s not an abstract graph. This is reflected in people’s mortgages, etc. And people are very, very worried this morning.
He said the government has got to set out “how are they going to fix the problems that they have made”, with the November statement [on 23 November] “far too long off” to review the situation. He also said his party was more united and confident than it had been in years and people at the Labour conference in Liverpool “can feel something in the air”. .
css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} And what they’re feeling in the air, I think, is change – because obviously, the government we’ve got has made an absolute mess of the economy and here you’ve got a Labour Party calmly, carefully and with confidence, setting out alternative plans for our economy and for our public services. Labour leader Sir Keir Starmer listens to a speaker on day three of the Labour Party Conference in Liverpool Photograph: Christopher Furlong/Getty Images 31m ago 07.
49 UK house prices could fall 10% to 15%, warn analysts and brokers Ray Boulger, from the mortgage broker John Charcol, has predicted a 10% fall in UK house prices next year, while analysts have warned prices could drop as much as 15%. Boulger says the gilt market meltdown, and the risk of interest rates rising to 6% by next summer “makes it very difficult to know where to price mortgage products”. This will undoubtedly have an impact on the housing market.
He told BBC radio 4’s Today programme: . css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} We can expect to see a significant fall in house prices, perhaps 10% next year.
Whilst at the moment I don’t think we’re going to see many more forced sellers… it’s certainly going to have an effect on people’s ability to buy. Analysts at Credit Suisse are warning that higher interest rates, rising inflation and the risk of recession could lead to house prices falling by between 10% and 15%. Andrew Wishart , senior property economist at Capital Economics, has also warned of a similar slump.
. css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} The rise in market interest rates that has already happened will push up mortgage rates to at least 6% and reduce the size of loans that lenders can offer.
The resulting drop in buying power makes a significant drop in house prices inevitable. Hundreds of mortgage deals have been pulled by banks and building societies, including HSBC and Santander. Nearly 300 UK mortgage deals pulled in a day as pound’s fall heralds rate rise Read more Updated at 08.
04 BST 41m ago 07. 39 Gilt yields hover at highest level since 2008 financial crisis Kwarteng’s £45bn unfunded tax cuts, which mainly benefit the wealthy, have stoked fears of a borrowing binge and led to a government bond meltdown since Friday. The selloff has pushed up yields – the interest paid on government debt – which move in inverse relationship to prices.
The yield on the benchmark 10-year gilt, as UK government bonds are known, has retreated slightly but is hovering around 4. 39%, up sharply from 3. 1% before Friday’s mini-budget.
Susannah Streeter , senior investment and markets analyst at Hargreaves Lansdown, explains: . css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} [Yields] have hit the highest level since the financial crisis in 2008, which is piling pressure on mortgage holders, given gilt yields have an impact on swap rates, which guide lenders’ mortgage offers.
Corporate bond yields have shot up even for investment grade companies, considered to be low risk, adding to worries that companies needing to refinance soon or borrow more to cope with rising input costs could struggle to make repayments. UK government bonds: why are yields rising and why does it matter? Read more To finance higher borrowing to pay for the tax cuts, an extra £72. 4bn in debt sales are now planned for the current financial year alone.
On top of this, the Bank of England plans to sell about £40bn of bonds over the next year to wind down its quantitative easing programme. Updated at 08. 06 BST 1h ago 07.
24 Introduction: Pound slumps after IMF urges UK to reconsider tax cuts Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets. In a stinging attack, the International Monetary Fund has urged Liz Truss ’s government to reconsider its tax-cutting plans to prevent stoking inequality. In rare public criticism of a leading global economy, the Washington-based fund said Kwasi Kwarteng ’s mini-budget risked undermining the efforts of the Bank of England to tackle rampant inflation amid the cost of living emergency.
It said a fiscal policy announcement planned by Kwarteng for 23 November presented an “opportunity for the UK government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high income earners”. IMF urges UK government to reconsider tax-cutting plans Read more Keir Starmer , leader of the opposition Labour party, said the IMF’s criticism shows how serious the situation is. He told LBC Radio: .
css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} The IMF statement is very serious and it shows just what a mess the government have made of the economy and it’s self-inflicted, this was a step they didn’t have to take. On the markets, sterling is on the backfoot again, slumping as much as 1% to around $1.
06, while the dollar has hit a fresh 20-year high as rising global interest rates stoked recession fears. The pound fell to an all-time low of $1. 0327 against the dollar on Monday morning, and had traded around $1.
1300 before Friday’s mini-budget. Seen as a safe haven, the dollar rose 0. 5% against a basket of major currencies to hit a new peak of 114.
7 in Asian trade. The yield on benchmark US 10-year government bonds also climbed, to 4% for the first time since 2010, peaking at 4. 004%.
Moh Siong Sim , a currency strategist at Bank of Singapore, told Reuters: . css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} It’s a combination of the spillover from the UK… where the gilt yields have gone ballistic.
And that has spilled over into other developed market bond markets, so there’s a bit of a ricochet effect. And of course… this is against the backdrop of a very determined message by the Fed to do whatever it takes to bring inflation down. The Bank of England is likely to deliver a “significant policy response” to the UK’s tax cuts, its chief economist Huw Pill said on Tuesday afternoon.
But Pill also argued that the Bank should wait until its next scheduled meeting in the first week of November (rather than through an emergency rate hike). Truss and Kwarteng apparently disagreed over how to deal with the crash in sterling. Downing Street denied that there was a row.
However, Whitehall sources said there was talk within the civil service of an argument between the prime minister and chancellor at their meeting on Monday morning, and Sky News said Truss had been resisting Kwarteng’s suggestion that a Treasury statement was needed to calm the markets. Truss and Kwarteng had row over sterling crisis response, say Whitehall sources Read more The Agenda 7. 45am BST: France Consumer confidence for September (forecast: 80) 8.
15am BST: ECB president Christine Lagarde speech 9am BST: Italy business and consumer confidence for September (forecasts: 102. 1 / 95. 1) 9.
15am BST: Bank of England deputy governor Jon Cunliffe speech 1. 30pm BST: US trade for August 3pm BST: US Pending home sales for August 3. 15pm BST: US Federal Reserve chair Jay Powell speech Updated at 07.
35 BST Topics Business Business live Stock markets Currencies Bonds Reuse this content.
From: theguardian
URL: https://www.theguardian.com/business/live/2022/sep/28/sterling-slumps-imf-urges-uk-reconsider-tax-cuts-stinging-attack-business-live
