As was widely predicted, the Bank of England yesterday cut interest rates from 0.5 per cent to 0.25 per cent, a record low and the first cut in seven years.
The Bank of England has also signalled that rates could go lower if the economy worsens, meaning that savers and pensioners will be even worse off than they are now.
The Bank also announced additional measures to stimulate the UK economy, including a £100 billion scheme to force banks to pass on the low interest rate to households and businesses. It will also buy £60 billion of UK government bonds and £10 billion of corporate bonds.
RBS
Royal Bank of Scotland is yet to decide whether to pass on the Bank of England’s cut in interest rates to its borrowers in a move that risks a row with its governor, Mark Carney, The Guardian reports.
As the 73 per cent taxpayer-owned bank slumped to a £2 billion half-year loss, the bank admitted it was still reviewing the implications of the historic rate cut to 0.25 per cent which is expected to impede its ability to generate profits as quickly as hoped.
Pressure on the Chancellor
The Chancellor is facing growing pressure to unleash a package of tax cuts to boost the economy, as he said that he would take ‘any necessary steps’ to avoid a damaging downturn, according to The Times.
Philip Hammond has already been urged to cut VAT, bring forward a major investment spending programme and delay a plan to force employers to pay a new levy to fund apprenticeships.
It comes before an autumn statement in which Hammond will face difficult decisions over how to handle falling levels of growth. He has already signalled he will ‘reset’ George Osborne’s plan to eliminate the deficit by 2020.
Rents
People spend more than a third of their disposable income on rent across large parts of England, a BBC investigation has found.
Analysis shows the average rent of a one-bedroom property in almost half of all districts, boroughs and cities would cost more than 30 per cent of the median take-home salary for the area. The problem is most acute in London and the South East.
According to Shelter and the Joseph Rowntree Foundation, spending more than a third of your disposable income on rent or a mortgage means you may not be able to afford other basic needs.
House prices
UK house prices fell in July, reversing gains in June, but it is too soon to tell if the Brexit vote will have a major impact, mortgage lender Halifax has said.
House prices in July dropped 1 per cent – bigger than the 0.2 per cent fall expected by economists – after rising 1.2 per cent in June. Compared with a year earlier, prices in the three months to July were up 8.4 per cent – unchanged from June’s rate.
‘Month-on-month changes can be erratic and falls often occur within an upward trend. Overall, it remains too early to determine if there has been any impact on the housing market as a result of June’s EU referendum result,’ Halifax economist Martin Ellis said.
Meanwhile, research from Lloyds Bank has revealed that the legacy of London 2012 lives on.
The study shows that average property prices in the 14 postal districts in East London closest to the Queen Elizabeth Olympic Park have risen from £286,638 in September 2012 (at the close of the Paralympic Games) to £438,065 in March 2016 – an increase of 53 per cent or £151,427, equivalent to a monthly rise of £3,522.
This is more than three times the rate of increase seen in England and Wales – nationally property values grew on average by 17 per cent over the same period, from £234,947 to £275,872.
Jobs
The number of people in the UK securing a permanent job has fallen for two months in a row, according to a survey.
The Report on Jobs, produced monthly by IHS Markit, collects data from 400 UK recruitment and employment firms. Its data suggests permanent placements in July fell at the sharpest rate since May 2009, with participants citing uncertainty caused by Brexit. The results also indicated that some clients of recruitment firms had shifted towards using short-term staff.
‘The UK jobs market suffered a dramatic freefall in July, with permanent hiring dropping to levels not seen since the recession of 2009,’ said Kevin Green, chief executive of the Recruitment and Employment Confederation which sponsors the survey.