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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK house price falls spread; Wilko falls into administration; US inflation rises to 3.2% – as it happened

United States RICS United Kingdom Halifax (Organization) Inflation Interest Rates Simon Rubinsohn Britain Nationwide
A couple with their back to the camera look into an estate aghennt's window
An estate agent’s window in Islington. Photograph: James Veysey/Shutterstock

Closing summary

Time for a recap.

More than 12,000 jobs are at risk after discount retailer Wilko fell into administration today.

PwC took control of the business after rescue talks with prospective suitors failed. Wilko will continue to trade from its 400 stores “without any immediate redundancies”, but there may be job losses if a rescue can’t be found.

Mark Jackson, the chief executive, said:

“We left no stone unturned when it came to preserving this incredible business but must concede that, with regret, we’ve no choice but to take the difficult decision to enter into administration.

“We’ve all fought hard to keep this incredible business intact but must concede that time has run out and now, we must do what’s best to preserve as many jobs as possible, for as long as is possible, by working with our appointed administrators.”

Zelf Hussain, joint administrator and PwC partner, said:

“It is incredibly sad that a well-loved, family business that has been on the high street for over 90 years has had to go into administration today.

“As administrators, we will continue to engage with parties who may be interested in acquiring all or part of the business.

“Stores will continue to trade as normal for the time being and staff will continue to be paid.”

The GMB union claimed that the collapse could have been avoided with “better management”.

Here’s the full story:

In other news…

British house prices saw the most widespread falls since 2009 last month as interest rates hit a 15-year high, surveyors warned.

Rics also reported that rents surged last month.

More borrowers have fallen into arrears on their mortgages, data shows, including a large rise in buy-to-let landlords missing payments.

And court proceedings for no-fault evictions in England have reached their highest level in six years, ahead of new legislation being passed to ban the practice.

In the US, inflation has risen to 3.2% per year in July.

ING says the data boosts the case for no further US rate hikes:

A second consecutive benign set of inflation prints adds to optimism that the Fed rate hike cycle is at an end and a soft landing is achievable for the US economy.

The British government is considering tightening rules on investment in China after the US president announced new measures aimed at limiting the dollars and expertise flowing into sensitive technologies in the country.

Here’s the rest of today’s news:

A local newspaper publisher facing a staff exodus and a strike ballot over low pay has announced it is considering a bid for the Daily Telegraph.

National World, which owns regional titles including the Scotsman and the Yorkshire Post, told the stock market it was a “possible participant” in the bidding for Telegraph Media Group.

The company said owning the Telegraph would fit with its policy of making acquisitions and then “implementing its new operating model”. This approach includes using artificial intelligence to automate the process of creating newspapers and reduce the need for human involvement.

More here:

As well as Wilko customers, we’d also like to hear from staff at the retailer.

How long have you worked and there and how will you be affected? What have you been told by your employer? Are you concerned for your job?

Back in the mortgage market, Forbes are reporting that NatWest will cut its rates on Friday.

They say:

“NatWest is cutting selected two- and five-year fixed rates by up to 0.65 percentage points for new customers from tomorrow (11 August).

“It is offering a two-year fixed rate for remortgage at 6.16% (60% LTV) with a £995 fee and an equivalent five-year fix at 5.63%. The bank is also cutting fixed rates across its first-time buyer, shared equity loan, help to buy remortgage deals and buy-to-let loans.”

Updated

Wilko could still keep operating as a going concern, protecting staff jobs, if a buyer can be found, says Michael Lynch, partner at city law firm DMH Stallard:

“Wilko entering into formal administration does not necessarily mean it cannot continue as a going concern, with the saving of jobs.

“Parties interested in purchasing Wilko prior to its administration will now find a more attractive business to purchase, without its previous debt burden and reported capitalisation requirements.

“The appointed administrators will likely have determined the purpose of the administration; if that purpose is to rescue the company as a going concern, then that would indicate that there is good potential to achieve that.

“Any continued trading under administration is supportive of an ongoing sale. However, unless there is a purchaser already ready to go, the appointed administrators will need to take a measured and independent view of the viability and value of the business before taking steps to market and sell the same.

“Ultimately, administration is a collective insolvency tool that arose to preserve a business, safeguarding it from creditor action, whilst looking to realise the business and/or its assets for the benefit of its creditors.”

Updated

Here’s the open letter from Wilko CEO Mark Jackson today, in which he announces that administrators are to be appointed:

Jackson signs off by saying:

It’s been an honour to have worked alongside you all as we fought to realise and to maximise the significant opportunities that existed to re-establish a profitable Wilko.

B&M, Poundland and Home Bargains will benefit from Wilko’s crisis, says Orwa Mohamad, analyst at research group Third Bridge:

“Wilko had lost its way on pricing and customers are aware of this. They had lost their way on availability and competitors fared much better. Similarly, Wilko’s online offers have gone significantly downhill over the last couple of years while competitors continue to invest in this area.

“The three retailers that will most benefit from the sad news of Wilko are B&M, Poundland and Home Bargains. It will be somewhat of a competition in trying to hoover up Wilko customers.”

Updated

Here’s GMB union leader Gary Smith:

This is a good point:

Fans of Wilko have been sharing their sadness about the chain’s fall into administration today, and their concerns that stores may close if a buyer isn’t found.

Wil

Labour MP Jonathan Reynolds, the shadow business secretary, says Wilko’s fall into administration is ‘dreadful news’ for its staff, and their families:

Wilko's administrators: 'It's incredibly sad'

PwC have been appointed as Wilko’s administrators, and confirmed that the retailer will continue to trade from all its stores “without any immediate redundancies”.

Jane Steer, Zelf Hussain and Edward Williams from the corporate finance firm have been appointed to oversee the process.

PwC said the retailer has suffered “increasing cashflow pressure and a deterioration in trading” after sales were hit by the pandemic and cost-of-living crisis.

Hussain said:

“It is incredibly sad that a well-loved, family business that has been on the high street for over 90 years has had to go into administration today.

“Many high street retailers are facing a number of well-documented challenges and Wilko has been significantly impacted by the headwinds facing the industry including inflationary pressure and rising interest rates.

“As administrators, we will continue to engage with parties who may be interested in acquiring all or part of the business.

“Stores will continue to trade as normal for the time being and staff will continue to be paid.”

Updated

US inflation rises to 3.2%

Just in: the US inflation rate has risen, but remains a lot lower than in the UK.

US consumer prices rose by 3.2% a year in July, official data just released shows.

That’s lower than the 3.3% that economists forecast, but could still raise concerns that America’s fall in inflation is bottoming out.

During July alone, prices rose by 0.2% – driven by higher housing costs, and a 0.2% monthly increase in food prices.

Encouragingly, though, core US inflation (stripping out food and energy) dipped to 4.7% a year from 4.8%.

The latest UK inflation report is due next Wednesday, after UK prices rose by 7.9% in the year to June. The Bank of England has predicted UK inflation will drop to 7% in July.

Updated

Wilko shoppers: tell us what you like most about the store

We’d like to hear from people who shop at Wilko. What do you like about the store and what will you miss most?

Please share your story here if you are 18 or over, anonymously if you wish. For more information please see our terms of service and privacy policy.

Shoppers have spoken of their disappointment over the potential collapse and prospect of more vacant shops in UK high streets.

Pam Comer, 72, who visited the Wilko store in Ely, Cambridgeshire, with her husband, told PA Media:

“It’s sad – more empty shops.

“I feel sorry for the people employed by Wilko.”

Wilko’s fall into administration is part of a wider trend of UK companies collapsing.

Government figures last month showed that the number of firms falling into insolvency has risen to the highest level since 2009 in England and Wales, in the last quarter.

Rising borrowing costs, and the squeeze on consumer spending, has hit retailers, hospitality firms and other companies.

Matthew Hennessy-Gibbs, insolvency litigation partner at Keystone Law, says:

“Company insolvencies reached a higher level in July than in 2009 and regrettably that trend seems set to continue as retail giant Wilko has collapsed into administration putting 12,000 jobs at risk. No sector is immune to what was first a financial pinch but is now a choking financial squeeze. Many big-name brands have gone to the wall in 2023 and some of those that have been “rescued” have had to close a number of sites.

Persimmon, one of the UK’s largest housebuilders, has cut 300 jobs as weak demand linked to the fallout from the government’s autumn mini-budget sent half-year profits plunging by 65%.

The company said it was pushing ahead with a cost-cutting drive, as it grappled with a drop in customers committed to buying homes after the market meltdown, which pushed up interest rates and made mortgages more expensive for prospective homeowners.

Administrators from PricewaterhouseCoopers, who are set to be formally appointed on Thursday afternoon, are expected to continue to seek a buyer for at least part of Wilko, my colleague Sarah Butler says.

It is understood that managers were told the news on Thursday morning just before 9am and went on to brief staff in stores, she says.

She also explains how Wilko faced a “cash squeeze” after falling to a loss:

Suppliers paused or reduced deliveries, leaving Wilko with gaps on shelves after it struggled to pay its bills and at least one credit insurer withdrew trade cover.

Here’s the full story:

Updated

British billionaire John Caudwell, the founder of Phones 4u, warns that the “hard times” that hit Wilko will not ease soon:

“It’s not surprising in terms of the world in general. Individuals and businesses are facing hard times as a result of inflation, post pandemic situation and the Ukraine war so there are hard times ahead and they aren’t going to get easier in the short term.

“With that said, it’s surprising that a business like Wilco is struggling because a DIY environment usually prospers a little bit more in hard times because people tend to do things themselves. It’ll be interesting to see what the news is on that in the next few days.”

Updated

Another “iconic British high street staple” has fallen victim to market forces, comments Sean Moran, insolvency partner at law firm Shakespeare Martineau:

The appointment of administrators appears to rule out a rescue of the Wilko business and now attention turns to the strategy they will pursue to maximise value for the company’s creditors. This might involve a sale of more profitable leases and/or other parts of the business.

“Whilst not unexpected, Wilko’s administration will send shock waves through the Great British retail sector with the possibility that as many as 12,000 people will face job losses. It’s now down to the administrators to start the painful process of extracting any remaining value from a business that has had a presence in the UK for nearly 100 years.

“The collapse shows that even the biggest discount stores aren’t immune to the economic crisis with retailers struggling as customers tighten their belts. Wilko has been fighting for some time now against more agile high street competition in the discount space, just last year borrowing £40m from the restructuring specialist, Hilco.

Updated

Ian Shepherd, the former CEO of retailer Game, has written a very interesting Substack post about how it feels to be inside a business in the final days before administration.

He says Hemingway was correct when he wrote that bankruptcy happens two ways, “gradually, and then suddenly”, explaining:

A key lender, in response to a failed covenant test on their debt, suddenly wants to meet you, in their offices, tomorrow. A credit insurer, spooked by bad press, announces they are pulling cover from suppliers to your business. A key supplier, perhaps with US shareholders who are both very conservative about risk and very litigious, decides to withhold their products. In response to any or all of these, the share price drops even further and the journalists start their ‘where did it all go wrong pieces’. Your mum calls you – suddenly worried by the story in her daily paper about your business. Your colleagues also start asking questions – if you run a retail business, you suddenly start getting direct emails from store teams asking what all this coverage means for their store and their jobs.

And the great paradox of this predictable, slow building and yet sudden rush of bad news is that the result of it is that your external stakeholders suddenly demand a huge amount of your time, and that of your leadership team. Banks want to send in their pet management consultants to “help”. Credit insurers and nervous suppliers want weekly and then daily meetings about your cash position. Your board probably get pretty nervous too, which all too often means the need for 100 more slides in the weekly update pack.

After a while, you’ll realise you are working harder, and longer hours, than you’ve ever done before but almost none of your time is spent actually fixing the problems in the business. The strategy you were following is thrown to one side, trampled by the legions of 25-year-old consulting ‘experts’ producing their own packs for your bank. Any part of your strategy which involved divesting profitable assets to pay back debt becomes impossible now everyone knows you are a forced seller …

Here’s the full piece, called “Besieged”.

Updated

GMB union blame mismanagement

Nadine Houghton, national officer at the GMB union, says Wilko failed to take advantage of the growing demand for bargain retailers:

“The 12,000 Wilko workers now facing potential redundancy will take little solace that with better management the situation that has befallen Wilko was, sadly, entirely avoidable.

“GMB has been told time and time again how warnings were made that Wilko was in a prime position to capitalise on the growing bargain retailer market, but simply failed to grasp this opportunity.”

Updated

The collapse of Wilko could deprive towns and cities across the UK of one source of low-cost goods.

Matthew Holehouse, British politics correspondent at the Economist, compares it to the collapse of Woolworths in 2008:

Updated

Wilko is Britain’s biggest retail casualty since convenience store chain McColl’s in May last year, says Reuters (McColl’s was subsequently bought by supermarket group Morrisons), adding:

Wilko, which started as a single hardware store in Leicester, central England, in 1930, is the first major retail victim of Britain’s tougher economy, which has been hit by 14 consecutive interest rate rises since December 2021.

Updated

Wilko’s chief executive said the retailer had received rescue offers before it was forced to enter into administration.

Mark Jackson said:

“While we can confirm we had a significant level of interest, including indicative offers that we believe would meet all our financial criteria to recapitalise the business, without the surety of being able to complete the deal within the necessary timeframe, and given the cash position, we’ve been left with no choice but to take this unfortunate action.”

Administrators at PwC are expected to run a further sales process for Wilko, the Financial Times reports, even though previous rescue talks with prospective suitors have failed.

But ultimately, PwC could liquidate the chain if no solution is found, the FT warns, saying:

…the company has faced increasing competition from nimbler rivals in recent years, leaving it grappling with lacklustre sales amid mounting cash and inflationary pressures.

It fell to a £36mn pre-tax loss in the year to January 2022 from a £3.2mn profit the year before, according to its most recent accounts filed at Companies House.

The GMB union have blamed Wilko’s management for its fall into administration.

Nadine Houghton, GMB national officer, says (via Bloomberg):

“Much needed cash was taken out of the business by the Wilkinson family even when it was struggling,”

Wilko collapses into administration after rescue talks fail

NEWSFLASH: The troubled budget retailer Wilko has called in administrators, putting more than 12,000 jobs at risk after it failed to agree a rescue deal.

The family-owned household and garden products retailer, which has about 400 stores, is expected to have to close dozens of outlets, leaving big gaps on high streets after weeks of talks with potentially interested parties.

Mark Jackson, the chief executive, said:

“We left no stone unturned when it came to preserving this incredible business but must concede that with regret, we’ve no choice but to take the difficult decision to enter into administration.

“We’ve all fought hard to keep this incredible business intact but must concede that time has run out and now, we must do what’s best to preserve as many jobs as possible, for as long as is possible, by working with our appointed administrators.”

More here:

Updated

Tom Davey, director and co-founder at litigation finance broker Factor Risk Management, fears Wilko won’t be the only retailer to hit problems:

“The predicted perfect storm of rising prices coupled with higher mortgage rates has finally hit UK consumers’ spending power, with nasty knock-on effects for the retail industry.

“After a torrid period during the pandemic, and with continued supply issues and rising interest rates, many retailers will find the conditions impossible to survive in their current guise and we expect to see an increasing number of high profile companies restructuring and facing fire sales as a result of this.

“For companies such as Wilko, cheap capital has disappeared and this has led to a noticeable rise in both corporate and personal insolvencies over the past year. These figures are only likely to worsen.

“The cost of managing inflation will be paid for by individuals and struggling corporates who have survived on cheap credit, and it speaks to the economic climate that has prevailed for the last 15 years that a return to historically more normal interest rates is having, and will continue to have, such a damaging effect on individuals and the high street in particular.”

Updated

UK mortgage arrears rise

More UK mortgage holders have fallen into arrears on their loans in the last quarter, as rising interest rates and the cost of living squeeze hits households.

The trade body UK Finance reports that 7% more homeowners are now behind on their payments, compared with the first quarter of this year.

The number of buy-to-let mortgages in arrears has jumped 28% quarter-on-quarter, suggesting that more landlords are struggling to cope with higher interest rates.

Here’s the details:

  • There were 81,900 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023, 7% greater than in the previous quarter.

  • Within the total, there were 30,940 homeowner mortgages in the lightest arrears band (representing between 2.5% and 5% of the outstanding balance). This was 12% greater than in the previous quarter.

  • There were 8,980 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023, 28% greater than in the previous quarter.

  • Within the total, there were 4,810 buy-to-let mortgages in the lightest arrears band (representing between 2.5% and 5% of the outstanding balance). This was 41% greater than in the previous quarter.

Updated

Wilko would be the biggest high street casualty in years if it collapses today, points out Retail Week.

It says:

The retailer had filled the gap left by the collapse of Woolworths in 2008, but has since faced increasing competition from value retailers including B&M and Home Bargains.

Competition from online retailers will also have hit Wilko’s sales …

Updated

Despite hopes of a mortgage price war, there’s not actually much change in the average rates today.

Data provider Moneyfacts reports that:

  • The average two-year fixed residential mortgage rate today is 6.83%. This is unchanged from the previous working day.

  • The average five-year fixed residential mortgage rate today is 6.33%. This is down from an average rate of 6.34% on the previous working day.

Halifax’s price cuts kick in tomorrow, so we may see the impact of that in the coming days.

Updated

Thousands of staff at low-cost retailer Wilko are set to be told this morning that the chain has collapsed, Bloomberg reports.

It says:

The UK company, which is privately owned and has about 400 stores, is due to enter insolvency proceedings as soon as Thursday morning unless an unexpected last-minute buyer emerges, according to people familiar with the situation.

Wilko previously appointed advisers at PricewaterhouseCoopers LLP to find new funding but potential buyers withdrew their interest in recent days. It has roughly 12,000 staff.

Updated

Sky News: hopes fade for Wilko rescue deal as administration looms

Hopes of a rescue deal for troubled UK budget retailer Wilko are fading today, Sky News reports.

It says Wilko could be heading into insolvency within hours.

Here’s the story:

Sky News has learnt that Wilko’s board is expected to appoint PricewaterhouseCoopers (PwC) as administrator later today after talks with a number of potential rescuers stalled.

The move would exacerbate the risk to 12,000 jobs, which would make the family-owned chain one of the biggest retail casualties for years.

One source described administration on Thursday as “inevitable” barring the sudden emergence of a new rescue plan.

Wilko has until Monday to find new funding, after filing a legal measure protecting it from creditors for 10 days on Thursday.

Yesterday, Wilko stopped offering home deliveries for orders on its website as it holds last-ditch talks on a potential rescue deal.

Updated

In the financial markets, China’s stock market has shrugged off its earlier losses after Joe Biden signed a ban on US investment in some Chinese tech.

The CSI 300 index is now up 0.2%, while Hong Kong’s Hang Seng is 0.15% higher.

The White House wants to stop the Chinese military from accessing US technology and capital, so is blocking US investment in semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.

Paul Donovan, chief economist at UBS Global Wealth Management, calls it “economic nationalism”, saying:

The US detailed restrictions on investment in China’s technology sector. Reports suggest the UK may follow. This is not surprising, but is another manifestation of deglobalization (political interference in global trade / capital flows).

As structural change sweeps the economy, scapegoat economics is likely to increase – blaming foreigners is always convenient. That encourages prejudice politics and economic nationalism. Whatever the merits of individual sanctions, the result is less efficiency.

China’s economic data this week has shown a slowdown in trade last month, and a drop into deflation, raising hopes that Beijing may stimulate its economy further.

This has lifted the copper price today.

Updated

And here’s Victoria Scholar, head of investment at interactive investor, on the Rics housing report….and the drop in mortgage rates by some lenders this week:

The Royal Institution of Chartered Surveyors (RICS) house price balance, which measures the percentage of surveyors reporting house price increases versus declines, fell to -53 in July from -48 in June, reaching the lowest level since April 2009 during the global financial crisis. Property sales fell at the fastest rate since April 2022 while rents jumped the most since 1999.

This data echoes recent reports from Nationwide and Halifax suggesting that the Bank of England’s aggressive stream of 14 consecutive rate hikes and the consequent surge in mortgage costs are sharply weighing on the housing market. The reduction in affordability of borrowing is prompting more and more would be buyers to turn to the rental market instead with increased demand leading to a jump in rents. Plus, landlords are dealing with increased costs because of inflation, which they are also passing on to their tenants.

While the decrease in house prices comes as a welcome development for first time buyers looking to get on the housing ladder, prices remain significantly above pre-pandemic levels and the jump in mortgage rates remain a major hurdle. However with the ‘mortgage price war’ ramping up as lender battle it out to gain customers, the intensification of commercial competition could play into the hands of would-be buyers, as lenders such as HSBC and Nationwide cut rates to boost demand.”

Here’s Simon French, chief economist at Panmure Gordon, on this morning’s healthcheck on the UK property market from the Royal Institution of Chartered Surveyors:

The UK government says it is weighing how to respond to US president Joe Biden’s decision to prohibit some tech investments in China.

A spokesperson for Prime Minister Rishi Sunak’s government said the executive order gave important clarity on the U.S. approach:

“The UK will consider these new measures closely as we continue to assess potential national security risks attached to some investments.”

Rhys Schofield, brand director at Peak Mortgages and Protection, also predicts mortgage lenders will continue to cut rates in the months ahead:

Following the mortgage rate cuts by Halifax, HSBC, TSB and Nationwide, Schofield says:

To brokers up and down the land, it certainly looks like a corner has been turned.

Clearly, it had been assumed that rates may go higher than now seems likely but with the forecasts looking a bit better I’d be expecting more rate reductions from lenders over the coming weeks.

Rob Gill, managing director at Altura Mortgage Finance, says the drop in UK inflation in June is now feeding through to mortgage rates.

That’s because fixed-term mortgages are priced against the yield, or interest rate, on UK government bonds, which are sensitive to interest rate and inflation changes.

Gill says:

The forecast following last month’s below-expected inflation figure was that mortgage rate cuts would follow 2-3 weeks after and we’re now seeing that prediction come true.

All eyes will now be on next week’s inflation figure, due on August 16th. If this confirms a further fall in inflation, a mortgage price war in September cannot be ruled out as lenders seek to make up for a quiet July and August.

The owner of Ladbrokes and Coral bookmakers has said it is close to “drawing a line” under a scandal at its former Turkish business, as it set aside £585m to pay a fine over alleged bribery.

Entain has put aside the cash in anticipation of a settlement with UK authorities, who entered into a deferred prosecution agreement with the international betting and gaming group earlier this year.

Entain said on Thursday that negotiations with the UK’s Crown Prosecution Service had now “progressed to a point where the company believes it is likely to be able to agree a resolution” to an investigation by HM Revenue and Customs (HMRC).

Housebuilder Persimmon has reported a sharp drop in housing completions this year.

Persimmon completed 4,249 homes in the first half of 2023, down from 6,652 in January-June 2022.

Pre-tax profits dropped to £151.0m, down from £439.7m a year ago, even though average prices rose to £256,445 from £245,597. Profit margins shrunk, as costs rose.

But Britain’s failure to build enough homes will support the market, Persimmon’s CEO, Dean Finch, argues:

“With the historic under-supply of homes the longer term outlook for housing remains positive.”

Update: Shares in Persimmon are up 1.3% in early trading.

Chris Beauchamp, chief market analyst at IG Group, says:

While the figures this morning are dire, Persimmon’s share price has actually held steady so far today, with a lot of the bad news priced in it seems.

Now the UK outlook is less gloomy, some hope prevails that the year ahead might be a better one, helping to keep the pessimism in check.

Updated

Full story: Four of Britain’s biggest lenders cut rates on fixed mortgage deals

Four of Britain’s biggest lenders have cut rates on their fixed mortgage deals, easing some of the pressure on hard-pressed homeowners, my colleague Rupert Jones reports.

Halifax, part of Lloyds Banking Group – the UK’s biggest mortgage lender – is reducing rates by up to 0.71 percentage points from Friday. That means a five-year fixed rate currently priced at 6.10% will be offered at a rate of 5.39%.

It also emerged that average rates on new two- and five-year fixed mortgages have fallen slightly.

Mortgage rates have risen rapidly as the Bank of England has pushed up interest rates in an attempt to tame inflation. Last week the Bank raised interest rates for the 14th consecutive time, bringing the base rate to 5.25%.

Relentlessly increasing housing costs have piled further pressure on Britons already struggling to cope with higher food and energy costs, but the cuts to rates – in some cases for the second time in a fortnight – will provide optimism that those costs may ease.

Updated

Rents are climbing

Britain’s surveyors have also reported the broadest increases in rents since Rics’ series began in 1999.

Demand from tenants to rent a home rose at the fastest pace since early 2022, as rising interest rates made it harder for people to buy a new home.

Those rising borrowing costs are also pushing some landlords out of the market – the number of properties being offered by landlords fell by the most since the early in the pandemic.

UK rental market

Rents are likely to continue rising sharply despite the cost-of-living crisis, surveyors are warning.

RICS chief economist, Simon Rubinsohn, explains:

Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis.”

Updated

Introduction: UK house price gauge falls to lowest since 2009 as interest rates rise

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Britain’s housing sector continues to weaken, as rising interest rates hit demand for property, the country’s surveyors are warning today.

The Royal Institution of Chartered Surveyors (Rics) has reported the most widespread falls in British house prices since 2009 in the last month.

Tighter lending environment continues to weigh heavily upon homebuyer activity, Rics says.

But there may be relief around the corner, with several major lenders cutting their mortgage rates this week.

The latest survey of Rics members, for July, found that:

  • House inquiries and sales continue to decline

  • House prices fall for a further month

  • Near-term market expectations remain negative

  • Rental demand continues to rise along with expected rental prices

Rics’s house price balance, which measures the difference between the percentage of surveyors reporting price rises and falls, dropped to -53 in July from a downwardly revised -48 for June.

That’s a larger fall than expected, and the lowest reading since April 2009,

Rics house price index

A net balance of -44% of surveyors reported a decline in agreed sales during July.

That’s down from -36% in June and is the weakest reading for the sales measure since the early stages of the pandemic.

RICS house price survey

That backs up the message from lenders Nationwide and Halifax in recent months, who have both reported falling prices since their peak last August.

Rics chief economist, Simon Rubinsohn, warns that demand is weakening:

“The recent uptick in mortgage activity looks likely to be reversed over the coming months if the feedback to the latest Rics Residential Survey is anything to go by.

The continued weak reading for the new buyer enquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment.

But the tide may be turning, with Halifax, HSBC, TSB and Nationwide all announced cuts to their mortgage rates, in what the Daily Mail is dubbing a “mortgage price war”.

Halifax, the nation’s largest lender, will slash the cost of its loans by up to 0.71 percentage points tomorrow, prompting brokers to predict mortgage rates would now be lowered elsewhere.

Jamie Lennox of Dimora Mortgages said:

‘Halifax is making the single largest rate reduction I have seen from a high street lender,’ said

‘I expect others to reduce their rates this week, which could start a price war.’

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, says Halifax’s move is a positive development:

It’s a welcome relief to see rate reductions, and this could be the start of a price war as transaction volumes drop and mortgage lenders need to get the sharp elbows out to hit their targets.”

But, rates are still much higher than before the recent surge. The average two-year fixed mortgage was 6.83% yesterday, according to Moneyfacts, up from 5.35% in April.

Also coming up today

The financial markets are eager to scrutinise the latest US inflation report, due at 1.30pm UK time.

Economists predict that US CPI rose to 3.3% in the year to July, up from a two-year low of 3% in June. That could create concerns that the drop in American inflation has bottomed out.

Asia-Pacific markets have dropped, amid anxiety after the White House unveiled a ban on US investment in Chinese technology.

The executive order signed by Joe Biden authorises the US treasury secretary to prohibit or restrict certain US investments in Chinese entities in three sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.

The agenda

  • 9am BST: Italian inflation report for July

  • 9.30am BST: Weekly UK economic and business activity report from the ONS

  • 11am BST: Ireland’s inflation report for July

  • 1.30pm BST: US inflation report for July

  • 1.30pm BST: US weekly jobless data

Updated

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The regulator warned food manufacturers that Amanita muscaria –  more commonly known as the fly agaric – and the compounds it contains are not authorized to use
The Independent UK
The Independent UK
“I go to church every Sunday when I’m home. Especially now I’ve replaced the booze with glue”: From GN’R and Pantera to Ozzy Osbourne and God, Zakk Wylde is the most connected man in rock
It’s Zakk Wylde’s world - we just live in it
Metal Hammer
Metal Hammer
My husband and I tried the Scandi Sleep Method and love it — 3 reasons you will too
We avoided a sleep divorce thanks to the Scandinavian Sleep Method, but will it work for you too? Three telltale signs that it will...
Tom’s Guide
Tom’s Guide
45 Years Ago, A Disney Misstep Was A Secret Sci-Fi Masterpiece
The haters were wrong. On its 45th birthday, 'The Black Hole' is just as wonderfully manic as ever. Here's why this flop is actually worth your time.
Inverse
Inverse
Black long COVID patients ignored
New research found that those living with long COVID in the U.S. had significantly more anxiety and depression
Salon
Salon
Jared Leto’s latest ‘iconic’ role leaves fans divided
‘Skeletor was going to make or break this movie,’ said one fan
The Independent UK
The Independent UK
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