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In our Market insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
UK renters offered no-deposit 100% mortgage loans for the first time since 2008.
Renters across the UK will be able to borrow up to 100% of the value of a property without a guarantor or deposit in a new mortgage plan introduced by Skipton Building Society.
The new mortgage product, aimed at first-time buyers who are currently renting, has a fixed rate of 5.49% for five years, over a maximum term of 35 years.
The average five-year rate was 5% in March, according to the Moneyfacts UK Mortgage Trends Treasury Report, across all loan-to-value ratios. Buyers typically get a 5.33% mortgage rate on 95% LTVs, according to the report, but the majority of buyers opt for a lower rate as standard.
A number of banks, including NatWest, Santander and Nationwide, introduced 95% mortgages in April and May 2021 after the British government announced a new mortgage guarantee program encouraging high loan-to-value lending to enable more first-time buyers to get onto the property ladder post-pandemic.
The new Skipton deal is widely reported to be the first time a mortgage lender has offered 100% mortgage products since 2008, when some building societies offered rates of up to 125%. Many of the products were then pulled from the market as the country fell into a financial crisis.
In a newly released statement, Skipton said it would ensure monthly mortgage payments for each applicant are not more than the average of their last six months’ worth of rental costs.
The offer is only available for first-time buyers, and is subject to affordability and applicants’ credit scores, as well as a good track record of rental payments over at least 12 months previous.
According to research carried out by Skipton, 35% of renters are struggling to save due to increased rental costs sparked by the increased cost of living.
US interest rates raised to highest level in 16 years, with ECB rate hikes set to continue as outlook remains bleak
The US central bank has raised interest rates to the highest level in 16 years as it battles to stabilise prices.
The Federal Reserve increased its key interest rate by 0.25 percentage points - its 10th hike in 14 months.
That pushed its benchmark rate to between 5% and 5.25%, up from near zero in March 2022, although the Federal Reserve has hinted the rise may be its last one for now.
The European Central Bank has also raised rates again, although by a smaller amount than in previous months.
The ECB lifted its three key interest rates by 0.25 percentage points, whereas the three preceding meetings have all seen a larger rise compared to the most recent discussions.
In the US, higher rates have sharply raised borrowing costs, spurring a slowdown in sectors such as housing and playing a role in the recent failures of three core US banks.
The bank started raising interest rates aggressively last year when prices in the US were soaring at the fastest pace in decades.
Since the Fed started its campaign, price increases in the US have shown signs of moderating.
In March, inflation, the rate at which prices rise, stood at 5% - the lowest level in over two years - though this figure is still uncomfortably high for the Federal Reserve, which is targeting a 2% rate.
Alongside the most recent developments in the US, in Europe, the European Central Bank has also been raising rates to try to slow the pace of price increases in the countries that use the euro.
Earlier this week, the most recent figures showed that eurozone inflation increased in April for the first time in six months. Prices rose at an annual pace of 7%, well above the ECB's target of 2%.
On Thursday of last week, the ECB raised its key deposit rate - how much interest it pays on deposits - to 3.25% from 3%. It also lifted its main refinancing rate - how much banks have to pay when they borrow money from the ECB - to 3.75% from 3.5%.
However, unlike the US Federal Reserve, the ECB did not hint that it might have finished with rate rises for now, setting a further tone of uncertainty for all involved.
European stocks close higher as markets digest new rate hikes; FTSE closed and Italy’s BMPS rallies strongly.
European indexes have started the trading week on a positive footing, with traders looking ahead to more corporate earnings, economic data and a Bank of England rate decision this week.
France’s CAC 40 and the Italian FTSE MIB closed marginally higher on Monday, while the German DAX ended the session flat. The U.K.’s FTSE 100 was closed for a public holiday after the coronation of King Charles III.
Market players have spent weeks juggling concerns over inflation and interest rates, with the Bank of England due for a rate-setting meeting on Thursday.
Both the Federal Reserve and the European Central Bank hiked rates by a quarter of a percentage point last week, with many now expecting the former to start cutting rates at some point during the summer.
In individual stocks news, Italy’s Banca Monte Dei Paschi rose 5% in morning deals after a report said the Italian Treasury is open to reducing its 64% stake in the lender.
Asia-Pacific markets largely rose on Monday, with the only outlier being Japan, which saw the Nikkei 225 fall. Minutes from Japan’s March monetary policy meeting showed board members were concerned over inflation accelerating at a higher-than-expected pace.
U.S. stocks opened flat on Monday as investor attention this week turns to April’s consumer price index due out Wednesday, followed by the producer price index on Thursday.
