Afternoon summary
Over in parliament, Jeremy Hunt is due to update MPs on the Mortgage Charter agreed with lenders on Friday.
Our Politics Liveblog should have all the action, as it happens from 3.30pm.
So, time for a quick recap….
The squeeze on UK mortgage-holders has tightened, with the average cost of two and five-year fixed mortages hitting the highest since last November today.
Financial data provider Moneyfacts reports that the average 2-year fixed residential mortgage rate has risen to 6.23%, up from 6.19% on Friday, while 5-year fixeds now cost 5.86%, up from 5.83% on Friday.
The financial markets predict UK interest rates will have risen to at least 6% by early next year….
… although City economists forecast a peak of 5.5%, according to a new poll.
Savings rates have also risen today, Moneyfacts reports.
Rising prices have helped Primark’s owner, Associated British Foods, to lift its profit guidance for this year.
Cruise operator Carnival has recorded a record quarter for bookings, as demand for sailings picks up and prices rise…
Pakistan’s central bank has raised its interest rates from 21% to 22% at an emergency meeting.
The UK’s post-Brexit border strategy risks further pushing up food prices, according representatives of Britain’s fresh produce industry.
Shares in defence companies dipped this morning, as the abortive mutiny by fighters of the powerful Wagner Group raised doubts over president Vladimir Putin’s position. Gas prices rose, but have now dipped back.
And Wall Street is remarkably calm today.
There was a quasi coup in Russia over the weekend and the market is completely dead on Monday. Wild.
— Michael Antonelli (@BullandBaird) June 26, 2023
Maybe if Prigozhin said something about interest rates the market would've perked up.
— Jason Brooks (@brookskcbsradio) June 26, 2023
In other news….
Updated
In New York, the stock market has opened a little higher as investors ponder the implications of last weekend’s abortive mutiny in Russia.
The Dow Jones industrial average has gained 40 points or 0.12% to 33,767, while the technology-focused Nasdaq Composite is 0.4% higher.
Marios Hadjikyriacos, senior investment analyst at XM, explains:
It seems that market participants are ignoring the mounting signs of political instability in Russia, as the worst-case scenario of a full-blown civil war has been avoided.
Yet, geopolitical risks are back on the radar, which poses a risk for currencies such as the euro that are geographically exposed to Russian developments.
Updated
Cruise operator Carnival reports record bookings.
Cruise operator Carnival has just recorded a record quarter for bookings, as passengers return to the waves after Covid-19 restrictions were lifted.
Despite the cost of living squeeze, Carnival says it “saw continued acceleration of demand”. Total bookings made during the second quarter of its financial year reached a new all-time high for all future sailings.
However, the firm still made a net loss of $407m on a GAAP-reporting basis, although it reported an adjusted EBITDA profit of $681m, towards the top end of its forecasts in March.
Carnival says that “favourable pricing trends” (ie, they’re going up) helped it achieve record revenues of $4.9bn in the quarter.
Carnival Corporation & plc’s Chief Executive Officer Josh Weinstein says:
“With bookings and customer deposits hitting all-time highs, we are clearly gaining momentum on an upward trajectory.
We are focused on the durable revenue growth and margin improvement that will deliver on our SEA Change Program and propel us on the path to delevering and investment grade leverage metrics.”
Investors don’t appear impressed, though, with Carnival’s shares down 7%.
A group of economists polled by Reuters predict UK interest rates will peak at 5.5% this autumn.
The City has revised up its forecasts for future Bank of England action, after the central bank lifted rates from 4.5% to 5% last Thursday.
Economists are now anticipating two quarter-point rises, one in August and another in September, as the BoE sounds more concerned that persistently high inflation in Britain is taking longer to fall than hoped.
But as flagged earlier, the money markets predict rates will hit 6% (that is based on the prices of interest rate swaps – derivatives used to hedge against changes in rates).
Updated
Pakistan raises interest rates to 22% at emergency meeting
Over in Pakistan, the central bank has unexpectedly raised interest rates… to 22%, from 21%.
The State Bank of Pakistan’s monetary policy committee convened an energency meeting today, after concluding that the inflation outlook had deteriorated as the country struggled to agree an IMF bailout.
Just a week ago, State Bank of Pakistan said inflation has peaked and there’s no need to raise interest rate further. Irony a special meeting today increased it by 1%
— Irfan Ishaque (@irfanishaque) June 26, 2023
After days of talks with the IMF, Pakistan agreed to change its budget for the next fiscal year, by raising taxes and cutting spending in a bid to cut its fiscal deficit. Restrictions on imports are also being lifted.
The MPC says:
The Committee views that additional tax measures are likely to contribute to inflation both directly and indirectly, while the relaxation in imports may exert pressures in the foreign exchange market.
History of Interest Rate by State Bank of Pakistan
— Capital Stake (@CapitalStake) June 26, 2023
The State Bank of Pakistan has decided to raise interest rate by 100 bps to 22.00%
#Pakistan #economy #KSE100 #MonetaryPolicy #SBP #InterestRates pic.twitter.com/T5Ztolmp7g
Updated
Post-Brexit import checks 'risk further pushing up food prices'
The UK’s post-Brexit border strategy risks further pushing up food prices, adding to the cost of living pressures on households.
That’s according to a stark warning from representatives of Britain’s fresh produce industry, my colleague Joanna Partridge reports.
Traders in the food supply chain are warning they will not be able to absorb the extra cost of charges levied for import checks on goods entering the country from the EU and the rest of the world, due to be introduced in the new year.
Estimated additional annual costs of more than £10m, stemming from import charges, would have to be passed on to consumers, fuelling food inflation, just as prices are thought to have peaked.
Industry body the Fresh Produce Consortium (FPC) – which claims to speak for 70% of the UK’s fresh produce supply chain, including businesses that produce, package, move and sell fresh fruit, vegetables, cut flowers and plants – has written to ministers to share its members’ concerns about the UK’s post-Brexit border strategy.
In a highly critical submission to the government, the FPC accused ministers of adopting “an outdated and highly inefficient border solution which fails to meet the needs of a modern progressive industry and simply adds cost for consumers”.
Back in the City, Lingotto Investment Management – a fund chaired by former UK chancellor George Osborne – has increased its stake in online supermarket and robotics company Ocado to above 5%.
Lingotto, which is owned by Italian family Agnelli’s holding company, has disclosed the position in a regulatory filing today, showing it crossed the threshold on Friday.
Last Thursday, shares in Ocaco jumped 40% amid speculation that the company could be a takeover target for Amazon:
Savings rates rise
Moneyfacts have also reported that savings rates, like mortages rates, have risen today.
Based on savers with £10,000 to invest, they say:
The average 1-year fixed savings rate today is 4.61%. This is up from an average rate of 4.55% on the previous working day.
The average easy access savings rate today is 2.36%. This is up from an average rate of 2.35% on the previous working day.
The average 1-year fixed Cash ISA rate today is 4.31%. This is up from an average rate of 4.26% on the previous working day.
The average easy access ISA rate today is 2.47%. This is the same average rate as the previous working day.
UK banks have been under growing pressure to pass on interest rates increases to savers, with MPs concerned that this has not kept pace with rising rates for borrowers.
What To Do If Your Mortgage Deal Is Withdrawn
Brian Murphy, head of lending at Mortgage Advice Bureau, has sent over some advice for borrowers worried that mortgage deals are being withdrawn, and repriced higher.
1) Don’t panic
Whether you’re a first-time buyer or remortgaging, the mortgage market can be daunting. With the recent disappearance of mortgage products making homeowners and first-time buyers feel anxious, it’s important not to panic. Instead, at the beginning of your mortgage journey, make sure to set time aside to thoroughly research the products still available, and which of these meet your needs and criteria. If you’re midway through the application process, regardless of the changes a lender may make, it’s likely they’ll honour the interest rate you’ve agreed to for six months.
2) Speak to a mortgage adviser
An adviser can help you to navigate the mortgage market, supporting you throughout the process right up until you seal the deal. Finding the right mortgage offer for you can be both confusing and overwhelming, particularly with all the different terms and jargon. Knowing the industry inside out, a mortgage adviser’s job is to use their knowledge to help you find and secure a deal that suits your circumstances. Whilst we’re seeing deals being pulled, there are still plenty available. What’s more, mortgage advisers often have exclusive access to additional deals.
3) Get ready early
There are many steps with the mortgage application process, and it’s easy to feel bogged down in paperwork. Although this might seem boring, it’s crucial to have everything ready to go, along with a clear understanding at all times of where you stand within the process. A mortgage rate is considered ‘locked in’ once an offer has been made by the lender, and that ‘Decision in Principle’ can last up to six months. However, if you’re still sifting through the paperwork and are yet to submit your mortgage application, the sudden removal of your deal by the lender is a possibility.
4) Shop around for the right deal
Although we’re seeing some products being pulled from the market, there are others available. With higher interest rates, it’s important that first-time buyers and current homeowners who are looking to remortgage shop around. A mortgage adviser can help you find the most suitable deal for your circumstances and factor in true costs. It’s also important to not only think about headline rates, but also assess any additional fees that may be involved. Our online mortgage finder can also help you to quickly and easily find available deals, filtering offers based on your circumstances (for example, the value of your property).
5 Remember there’s always a plan B
If you find yourself in the stressful situation whereby your mortgage product has been withdrawn, or is about to be, it’s time to take a step back and review your options. In some cases, mortgage advisers will be notified a few hours before a deal is pulled off the market, giving you a small window of opportunity to get your application over the finish line. Whilst this isn’t always the case nor possible, it’s worth checki
The money markets are still predicing that UK interst rates will hit 6% by the end of this year, up from 5% at present.
Currently, the markets estimate there is a roughly 50:50 chance that the Bank of England delivers another large interest rate rise at its next meeting, in August, taking base rate up to 5.5%.
UK interest rates may reach 6.25% by February which would be the highest level since 1998$SPX $SPY $ES $MES_F pic.twitter.com/UHxAOw36Qv
— SaralTrader_Pragati (@SaralTrader) June 25, 2023
Rupert Thompson, chief economist at Kingswood, explains:
Almost certainly, the MPC will raise rates again in August. The only question is whether it is by 0.25% or 0.5% which will depend on the wage and inflation numbers released in the meantime. As to where rates peak, the market is now pricing in them reaching as high as 6%.
Once again, this looks on the high side but this is said with some humility. The market has recently been rather more accurate on the path for UK rates than most economists, particularly those at the Bank of England.
The Unite union are urging chancellor Jeremy Hunt to tackle Britain’s “profiteering crisis” when he meets the heads of the energy, water and telecoms regulators on Wednesday.
Unite general secretary, Sharon Graham said:
“Here we have a tacit acknowledgment from the chancellor that Britain is in the grip of a profiteering crisis. But to be honest, we need to go way beyond talking shops with regulators before we can be convinced the chancellor is serious about tackling Britain’s epidemic of profiteering.
“Tinkering at the edges is just not enough. Unite’s own research has shown that if domestic energy had been in public ownership at the time the crisis hit we could have saved every household £1,800 and cut inflation by 4%. Tinkering at the edges, and talking shops about the crisis are just not enough.”
UK retailers have denied accusations of ‘greedflation’ – the practice where firms take advantage of high inflation to ramp up their prices higher than is justified by rising costs.
But, as Primark showed this morning, many companies have been able to maintain or increase profits through price increases.
Updated
Back in the City, shares in luxury carmaker Aston Martin have jumped almost 10% after it struck a deal with the US firm Lucid to start making “ultra-luxury high-performance electric vehicles” from 2025.
The British luxury carmaker, whose losses more than doubled last year to almost £500m, has struck a cash and shares deal valued at £182m in which Lucid will take a 3.7% stake in London-listed Aston Martin.
The carmaker, which sold 6,400 luxury vehicles last year and has spent heavily on new models, said it would select powertrain components from Lucid for initial and certain future battery electric vehicle (BEV) models.
The company said the deal, which involves a minimum spend of £177m with Lucid, would help drive its plan to launch its first BEV in 2025.
Roberto Fedeli, Aston Martin’s chief technology officer, said:
“Combined with our internal development, this [deal with Lucid] will allow us to create a single bespoke BEV platform suitable for all future Aston Martin products, all the way from hypercars to sports cars and SUVs.”
Updated
Back in Germany, central bankers are hopeful that the country’s recession will end in the current quarter.
The Bundesbank, in its latest monthly report, predicts that gross domestic product will “rise slightly” in the April to June period, after contracting in October-December and January-March.
The Bundesbank says:
“Private consumption should bottom out.
Thanks to strongly rising wages, the real disposable incomes of private households are stabilising despite inflation remaining very high.”
It also predicts that Germany’s industry will withstand the decline in demand, adding:
Fallen energy prices are having something of an easing effect, the order books are still very well stocked, and supply bottlenecks are likely to continue diminishing.
However, this morning’s IFO survey of German business confidence suggested the recession could linger…
And for 2023 as a whole, the Bundesbank forecasts Germany’s economy will shrink by 0.3%, followed by a small recovery of 1.2% in 2024 and by 1.3% in 2025.
Updated
UK retail sales falter again, reports CBI
Just in: sales volumes at UK retailers have fallen for the second month running, a new survey shows.
The latest ‘distributive trades’ survey from the CBI lobby group shows that “difficult trading conditions” persist in the sector this month, despite Primark’s owner lifting its profit forecast this morning.
The poll found that more retailers reported a drop in sales volumes, rather than a rise, and that orders have also dropped. With sales weak, inventories have swelled.
The CBI says:
Retail sales volumes continued to decline in the year to June (weighted balance of -9% from -10% in the year to May) but are expected to be unchanged next month (0%).
Orders placed upon suppliers declined in the year to June, but at a slower pace than last month (-10% from -30% in May). Orders are expected to fall at a broadly similar pace next month (-9%).
Retailers reported the firmest stock positions since May 2020 (+33% from +25% in May). Stock volumes look set to remain elevated relative to expected sales next month (+26%).
Santander are increasing their purchase and remortgage rates from this evening, brokers report.
And just like that, not even 10.30am and Santander confirms it is increasing mortgage rates tomorrow.
— George Nixon (@George_Nixon97) June 26, 2023
Full applications to secure today’s rates need to be filed by 10.30pm tonight, we hear.
2 year fixed mortgage rates now 6.23% and Santander have announced they are raising their #mortgage rates tomorrow .#HoldYourNerve https://t.co/j7UvoAUKG4
— Julie McHamish (@julesmchamish) June 26, 2023
Santander UK’s chief executive, Mike Regnier, was among the bank bosses who met with chancellor Jeremy Hunt last Friday, where lenders agreed that struggling mortgage holders will be given a 12-month grace period before their repossession proceedings begin
Updated
UK fixed-rate mortgage costs are moving towards the highs set last autumn, points out The Times’s George Nixon:
Anyone hoping for a quiet week after whatever-the-hell last week was might have to readjust their expectations.
— George Nixon (@George_Nixon97) June 26, 2023
Average 2-y fix now up to 6.23%, say Moneyfacts, remember the post-Truss peak was 6.65% so we're fast heading there. pic.twitter.com/lqbJlbzuQz
German business sentiment falls as recession lingers
Over in Germany, business morale has worsened for the second month running as its economy struggles to emerge from recession.
The Ifo institute’s business climate index dropped to 88.5 in June, down from 91.5 in May, a larger decline than expected. A Reuters poll of analysts had predicted a fall to 90.7.
Ifo’s president Clemens Fuest says:
“Sentiment in the German economy has clouded over noticeably.”
ING economist Carsten Brzeski fears that the rebound of the German economy has ended before it ever really began, following last winter’s recession.
Brzeski adds:
The weaker-than-hoped-for Chinese reopening, a looming US recession and ongoing monetary policy tightening seem to be weighing on German company sentiment.
German business outlook plummets as shadow of recession lingers https://t.co/T7SuKV1MmI pic.twitter.com/eNVrwYPR7O
— Zoe Schneeweiss (@ZSchneeweiss) June 26, 2023
Back in the City, the FTSE 100 share index has hit a three-month low.
The blue-chip index has dropped by 55 points, or 0.75%, to 7407 points, the lowest since late March.
Weapons manufacturer BAE Systems are still the top FTSE 100 faller, down 3.3%, followed by Vodafone (-2.3%) and Lloyds Banking Group (-2.3%).
European gas prices rise as Russian mutiny fuels supply fears
UK and European wholesale gas prices have jumped this morning.
Bloomberg reports that the short-lived rebellion in Russia last weekend has “added to supply fears in an already volatile market”.
The European month-ahead benchmark is up over 6% at €35.15 per megawatt-hour, and was up 13% at one stage this morning.
UK gas price also gained around 10%, with the month-ahead price rising to 87.5p per therm.
Traders are judging that Russian geopolitical risk now is significantly higher than before the weekend, following mercenary leader Yevgeny Prigozhin’s brief mutiny.
George Lagarias, chief economist at accountancy group Mazars, says:
“Whether we like it or not, Russia is very important for the global supply chain, due to its status as a major energy supplier and commodities exporter. And the question is not how we will think about things long-term, but how commodity traders and corporates will react over the shorter term. Will they try to hoard commodities and energy, fearing fresh instability out of Russia?
“A running theme since the beginning of the year for us was increased uncertainty and unpredictability, in a world that shows no signs of returning to its pre-pandemic balance. While we don’t know what happened, we should not be surprised if we see upheaval in the commodities market, as investors fear further destabilisation.
“Further instability could, in theory, add to inflationary pressures, at a time when we at least thought that supply chain issues were behind us.
“Sticky inflation is probably the key risk for 2023. The biggest economic and financial concern from further Russian instability is that supply chain breakdowns could lead to a fresh inflationary cycle, at a time when we are not nearly done fighting the previous one.”
The cost of buy-to-let mortgages appears to have stabilised.
Moneyfacts reports:
The average 2-year buy-to-let residential mortgage rate today is 6.49%. This is the same average rate as the previous working day.
The average 5-year buy-to-let residential mortgage rate today is 6.39%. This is down from an average rate of 6.40% on the previous working day.
There are currently 2,459 buy-to-let mortgage products available. This is up from a total of 2,412 on the previous working day.
Todays rise in rising mortgages rates will do nothing to defuse the UK’s mortgage timebomb.
More than a quarter of UK homeowners on a fixed-rate mortgage are heading for sharp increase in monthly payments before the next election, following the rise in interest rates over the last 18 months or so.
Today’s 2-year tracker rate is 5.84%, Moneyfacts report, up from an average rate of 5.66% on Friday.
The standard variable rate as of 1 June 2023 is 7.52%.
UK fixed mortgage rates rise
UK fixed-rate mortages costs have jumped to new seven-month highs, adding to the financial pressures on borrowers.
Financial data provider Moneyfacts reports that the average 2-year fixed residential mortgage rate has risen to 6.23%, up from 6.19% on Friday.
That’s the highest since 16 November, when the property market was reeling from the chaos after the mini-budget.
The average 5-year fixed residential mortgage rate has inched up to 5.86%, up from 5.83% on Friday, the highest since the end of November.
These higher rates follow the Bank of England’s increase in interest rates last Thursday, which lifted Bank Rate to a 15-year high of 5%.
The number of residential mortgage products on the markets has risen, though, to 4,483 from 4,444 on Friday.
Analysis released by the Labour party show that homeowners in Britain are paying thousands of pounds more than Europeans for new mortgages, even before last Thursday’s half-a-percentage point rise in UK interest rates.
These figures lay bare the cost of the Tory mortgage penalty.
— Rachel Reeves (@RachelReevesMP) June 26, 2023
This Conservative government can’t grip this problem because they are the problem.
Labour’s plan to ease the Tory mortgage penalty offers practical help now.https://t.co/5n29kpkPp6
Updated
Defence company shares fall after Wagner mutiny
Shares in European defence companies are falling in early trading, as investors react to last weekend’s aborted armed mutiny.
BAE Systems are the biggest faller on the FTSE 100 index in London, down 3%.
Italian defence group Leonardo, Sweden’s Saab, Germany’s Rheinmetall and France’s Dassault Aviation were all down more than 3%.
This has pulled an index of European aerospace and defence stocks down by 1.5%, following a 30% surge over the last 12 months.
The rebellion by the Wagner group of mercenaries is raising questions about President Vladimir Putin’s grip on power, and the path of the Ukraine war.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
The Wagner incident may have exposed Putin’s weakness, and was the most serious threat to his rule in two decades. It could be a turning point in the war in Ukraine. But nothing is more unsure.
The value of Ukrainian government bonds has jumped this morning, after the aborted mutiny in Russia by Wagner Group mercenaries over the weekend.
The 2041 bond saw the biggest gains, rising as much as 2.9 cents to trade at 42 cents in the dollar - its strongest level since Russia’s invasion of Ukraine in February 2022, Tradeweb data analysed by Reuters showed.
Markets are trying to work out what Saturday’s dramatic developments mean for the Russia-Ukraine war.
Jim Reid, strategist at Deutsche Bank, says:
It could increase the risk of escalation by Mr Putin to reinstate an air of authority, or it could leave him vulnerable which could be seen as positive or negative for Europe, Ukraine and wider markets.
It’s just impossible to tell at this stage.
Our rolling coverage of the conflict is here:
The news about ABF’s star business, Primark, appears to be good, says retail analyst Nick Bubb.
He adds:
Well, while Kremlinologists try to work out what’s happening in Russia, there isn’t much doubt that Primark is still doing well…
HSBC moving headquarters from Canary Wharf
Banking giant HSBC is to leave its Canary Wharf headquarters after more than two decades, and shift its workforce to a smaller offce in the City.
A memo seen by Reuters shows that HSBC told staff its preferred option was to move to BT’s former head office near St Paul’s, which has been redeveloped.
The bank began a review to assess its “best future location in London” last year, Reuters reported, ahead of its lease expiring at the 45-floor tower at 8 Canada Square in early 2027.
According to The Times, which first reported HSBC’s decision earlier this morning, the bank has been considering several potential new offices since it told staff last Septemner it could leave its Canary Wharf tower.
The Panorama St Paul’s development is around half the size of the Canary Wharf site, but less space is needed following the move to hybrid working after the pandemic.
If the consumer is beginning to have doubts about spending, such reticence is not hurting Primark, says Richard Hunter, head of markets at interactive investor.
The return of the physical shopper helped Primark’s flagship city centre stores to perform strongly this year, Hunter explains, adding:
Of course, any further deterioration in the economic backdrop could weigh further on consumer sentiment, while central banks attempt so far unsuccessfully to put the inflation genie back in the bottle.
Even so, one thing which has become apparent over recent months is the British insistence on taking holidays, as evidenced by improving airline and travel numbers, which is often accompanied by a revamp of the wardrobe.
Updated
ABF: Consumers resilient despite 'doom and gloom'
Primark’s trading in the UK in June was stronger than the 6% like-for-like sales growth achieved in the 12 weeks to May 27, benefiting from warm weather, Eoin Tonge, finance director of parent company ABF, says.
Tonge also told Reuters that consumers have shown resilience despite gloomy commentary.
“Every quarter that’s gone by, it keeps on reminding us that the consumer has been more resilient than the doom and gloom.
“The doom and gloom has been around now for almost 12 months and the consumer continues to outperform the doom and gloom.”
Updated
Analyst: Cost conscious consumers kept Primark busy
Here’s Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service, on ABF’s profit upgrade this morning.
“Cost conscious consumers - who are after all, Primark’s bread and butter - have kept the tills ringing despite the cost of living crisis raging on in the UK. The no-frills fashion retailer, which has still only established the most basic of online presences, saw sales rise 13% in the third quarter.
“Giving its latest trading update, owner Associated British Foods, said higher average selling prices had boosted sales 7% like-for-like, in the three months under review, meaning like-for-like sales growth for the year is now at 9%. The sales of summer essentials, plus a boom in its beauty range, means that full year adjusted operating profits are now expected to be ‘moderately’ ahead of last year’s.
“Primark’s global expansion into Slovakia and with the signing of its first lease on a store in Texas, means the Primark brand is now in 16 countries - all predominantly reliant on good old-fashioned in-store shoppers.”
Supermarket chain J Sainsbury has announced £15m of price cuts this morning, a sign that the inflationary pressures hitting retailers and consumers is easing.
The price cuts to staple goods include Basmati Rice (1kg cut from £2.10 to £1.75), Spaghetti (500g down from 95p to 75p), and Corn Flakes (500g reduced to 69p from 85p).
It’s also price-matching its by Sainsbury’s whole chicken breast fillets to Aldi – the discount rival which has grown market share this year as customers sought lower prices.
Sainsbury’s says the changes won’t affect much farmers are paid.
The cost of living squeeze has also pushed up the service charges on flats.
The average annual service charge for a flat in England and Wales has jumped by 8% – or just over £100 – over the past year, new data from estate agent Hamptons shows.
The average charge is £1,431, equating to £119 per month, up from an average of £1,325 a year ago.
David Fell, lead analyst at Hamptons, says the increased cost of building materials and insurance are responsible.
He added
“While recent falls in the cost of some building materials and energy costs should start feeding through into lower charges for residents, it won’t happen overnight.”
Another factor is the impact of stricter fire safety measures prompted by the Grenfell Tower disaster.
“The latest service charge index from @Hamptons1869 found that since 2018 service charges for flats in England & Wales have soared by 51.7% after the introduction of new regulations” + inc in heating, running, insurance & maintenance costs @thetimes @walshdominic pic.twitter.com/dv1DXdGJi6
— Emma Fildes (@emmafildes) June 26, 2023
Updated
ABF raises profit outlook after lifting prices
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Hiking prices has proved profitable for Primark-owner Associated British Foods.
ABF has told shareholders this morning it now expects adjusted operating profit for the current financial year to be “moderately ahead of last year,” having previously expected to be “broadly in line”.
Sales across the group have grown 17% so far this year, and were up 16% in the third quarter (the 12 weeks to 27 May).
Primark, the discount clothes chain, has seen good demand for summer ranges, ABF says. Total sales were up 13% in the last quarter, while like-for-like sales grew 7%, “supported by higher average selling prices.”
Those higher prices will be a blow to struggling households. But despite them, sales at Primark’s flagship city centre stores have “continued to be good”, ABF adds.
The group’s food arm, which produces ingredients such as flour and sugar and various grocery brands including Twinings and Ovaltine, has also recorded good trading, with sales up 18% this year.
ABF adds that price rises, following the jump in commodity costs, lifted revenues, saying:
In particular, we have seen strong constant currency sales growth in Grocery and Ingredients largely driven by the necessary pricing actions taken earlier in the year to offset input cost increases.
ABF’s ‘necessary pricing actions’ have helped to push up prices in the shops, with UK food inflation hitting 19% this year.
This has added to the squeeze on consumers, with new figures last weekend showing that millions of renters are being hit by landlords passing on higher mortgage costs to their tenants.
Also coming up today
Jeremy Hunt is set to meet industry regulators on Wednesday, to ask what they are doing about any companies exploiting rampant inflation by raising prices.
The Chancellor is set to meet the Competition and Markets Authority (CMA), and the watchdogs for energy, water and communications on Wednesday, and will press them on whether there is a profiteering problem in their sectors and what they are doing about it, Treasury sources say.
In the financial markets, the Russian rouble fell to a near 15-month low against the dollar this morning, as traders react to last weekend’s aborted mutiny by the Wagner mercenary group. The rouble dropped to 87.2300 to the dollar, its weakest point since late March 2022.
The Russian rouble opened at a near 15-month low against the dollar in early morning trade on Monday, responding for the first time to an aborted mutiny by heavily armed mercenaries over the weekend. pic.twitter.com/h1BBfW4RJZ
— Srbija Evropa (@srbija_eu) June 26, 2023
And UK borrowers will be watching nervously for signs that interest rates may be heading higher, after last Thursday’s Bank of England rate rise.
Yesterday, Rishi Sunak urged homeowners and borrowers to “hold their nerve” over rising interest rates, as the fight to lower inflation continues, prompting criticism that the PM is out of touch on the the cost of living crisis.
'Out-of-touch' Rishi Sunak tells struggling families UK must 'hold our nerve' https://t.co/9ZhF3jrpoW. The elite of are selling the workers down the river. Yet saying they have no choice, putting up interest rates has not worked, they have being doing it for months. Stop now.
— oraina curry (@OrainaC) June 25, 2023
The agenda
9am BST: IFO survey of German business conditions
11am BST: CBI distributive trade survey of UK retail
3.30pm BST: Dallas Fed manufacturing index
6.30pm BST: European Central Bank forum on central banking
Updated
