Aurelia Butler

The Conservative government proposed a welter of reforms last month in a bill to boost London’s appeal to global investors in the wake of Brexit, increase investments by insurers in infrastructure, and regulate some cryptoassets.On Wednesday, the Financial Times reported that Liz Truss, the front-runner to succeed Boris Johnson as prime minister next month, would add new powers to the bill, giving ministers the ability to override financial regulators like the Bank of England (BoE), if deemed in the public interest.BoE Governor Andrew Bailey said in a letter to parliament’s Treasury Select Committee that he welcomed the financial services bill as initially proposed, which is intended to “establish a strong, responsive and internationally respected” approach to regulating financial services in Britain.”Regulatory independence is important, not least because our international standing, and therefore the competitiveness of the UK financial sector which the reforms are aimed at enhancing, depends on it,” Bailey said.”Anything that would weaken the independence of regulators would undermine the aims of the reforms,” Bailey added in the letter dated July 27 and published by the committee on Thursday.Bailey said the BoE’s banking regulatory arm would publish a discussion paper next month, setting out the BoE’s vision for implementing the reforms as they currently stand in terms of strong standards, accountability to parliament, stakeholders, and the public at large. More

There will be no such thing as a Free Lunch next week, but Martin Sandbu will be back on August 25. The cost of shipping a 40ft steel box across the world’s oceans has sunk. The nickel in a nickel is no longer worth more than the nickel itself. Even US headline inflation is falling. There have been some pretty convincing signs of late that the price surges in markets, from copper to used cars, that we’ve seen over the past year might now be behind us. Is it time for Team Transitory, a camp that took more blows than a UFC fighter during the first half of 2022, to launch a fightback and say inflation has been defeated? Not quite. That’s not to say the falls in the cost of container shipping and commodities don’t mean something. They show us that global trade, far from being on its deathbed, is resilient. That dynamism will help drive down supply-side price pressures. Yet these pandemic-era bottlenecks were — as their name implies — always going to dissipate. Meanwhile, the massive (and less soluble) supply-side risk presented by Russia cutting off, or even limiting, gas flows to Europe remains a threat. To get a sense of the degree to which energy prices are driving headline inflation, consider this. According to Bank of England deputy governor Ben Broadbent, between the first quarters of 2021 and 2023, the impact of the shock on households’ utility bills is likely to be five times as big as it was between 1974 and 1976 — the worst two years of the 1970s, a decade renowned for its oil price crisis. We don’t want to downplay the good news. In the US, less exposed to the impact of the Ukraine war, headline inflation may well have peaked. While it may take a little longer in Europe, the record-high prints will soon subside here too. But we would caution against seeing today’s print as evidence that the Federal Reserve, and other central banks, may be about to pivot to a much less aggressive strategy — or, as some investors are now pricing in, cut rates early next year as recession bites.What really matters for policymakers is not where inflation turns but how quickly it slides towards a level they are comfortable with. Our bet is that this level is between 2 and 3 per cent. Yet there’s much to suggest price pressures could stick around the 4 to 5 per cent mark for some time yet. The possibility of a sluggish shift back to 2 per cent is not just about the risk presented by energy prices, substantial though it might be. While monetary policymakers, including Fed chair Jay Powell, have been keen to heap the blame for failing to spot inflation on supply chains and the war in Ukraine, that’s not the only element that has been driving prices higher. As Stephen Cecchetti, of Brandeis University, put it: “It is odd that central bankers are focusing so heavily on supply-side inflation when demand is such a big component of the surge, especially in the US.”A core part of the demand-side story is the hotness of the labour market. Tiffany Wilding and Allison Boxer, economists at bond manager Pimco, pointed out in a note published on Wednesday that wage inflation in the US has broadened from the low-wage, low-skill services sectors to a range of industries, occupations and skill levels. Productivity levels, meanwhile, have fallen. According to their estimates, unit labour cost inflation is at 7 per cent — a level that has historically implied core CPI inflation of about 4 per cent. If Powell really wants to bring inflation to as low as 2 per cent, it increasingly looks as though the Fed will have to destroy jobs. Then there is inflation’s self-fulfilling element, where its mere presence creates more of the stuff. Joanna Konings, a senior economist at ING, points to the likes of UK dairy farmers, who may have spent years unable to raise their prices due to the major supermarkets’ sway, but who can now point to soaring energy and commodity prices and ask for more. “When inflation is easy to point to — when it’s clear costs are going up in a very visible way, then that strengthens the hand of any supplier. Producers are able to point to price increases, and in turn demand more from their customers,” she said. This world of margins does not contain infinite room for manoeuvre. Consumer prices for staples such as food and energy and shelter have soared at a pace that has left many people facing the worst cost of living crisis of their lifetimes. That crisis — and central banks’ rate rises — will weigh on demand. Yet this scrap between supplier, retailer and consumer is likely to take a while to play out. While it does, uncomfortably high inflation will prove harder to shift than a big boat stuck in the Suez Canal. Other readablesFT Alphaville has apologised (sort of) to CNBC’s Jim Cramer for doubting his capacity to predict inflation, or indeed anything. Chris Giles explains how collaboration between EU member states and energy substitution by industry can soften the blow dealt by gas shortages. Bloomberg’s Warsaw bureau chief Piotr Skolimowski has written a moving piece on how one Ukrainian family is adapting to life in Poland. Numbers newsFood prices are among those that have surged over the past year. However, over the past few months, the cost of food commodities, traded on international markets, have fallen. More

Investing.com — U.S. stocks are set to open higher in the wake of the weaker-than-expected consumer inflation report, with Disney’s subscriber increase helping. New producer prices and jobless claims data are scheduled for release, while IEA data points to a tightening supply situation in the crude market. Here’s what you need to know in financial markets on Thursday, August 11.1. Inflation optimism overdone?Risk sentiment has been on the rise Thursday, boosted by Wednesday’s cooler-than-expected consumer inflation reading, which investors have interpreted as easing the pressure on the U.S. Federal Reserve to aggressively tighten monetary policy.Investors are now pricing in a 50 basis point hike by the Fed in September, down from earlier expectations of a 75 basis point hike.However, they could well be jumping the gun.Fed policymakers were quick to speak after the release, attempting to dilute this optimism.The Fed is “far, far away from declaring victory” on inflation, said Minneapolis Federal Reserve Bank President Neel Kashkari, San Francisco Federal Reserve Bank President Mary Daly also warned it is far too early to “declare victory,” while Chicago Fed President Charles Evans stated inflation was still “unacceptably” high.After all, while inflation was flat in July, month on month, after advancing 1.3% in June, it was still up 8.5% compared to a year ago. And that’s still unacceptable.2. Disney takes lead in streaming gameWalt Disney (NYSE:DIS) has taken the lead in the global streaming competition, edging past Netflix (NASDAQ:NFLX) with a total of 221 million streaming customers as part of its third quarter results, announced after the close Wednesday.Disney started building a streaming service to rival Netflix in 2017, recognizing that audiences were moving to online viewing from traditional cable and broadcast television.The entertainment giant said that total Disney+ subscriptions rose to 152.1 million during the quarter. Combined with Hulu’s 46.2 million subscribers and the 22.8 million with ESPN+, this total of over 221 million surpasses long-time leader Netflix’s 220 million subscribers.This popularity has given Disney the license to plan price increases for customers who want to watch Disney+ or Hulu without commercials, even with the public struggling with soaring inflation.That said, the company also lowered its long-term subscriber forecast for Disney+ customers on Wednesday to between 215 million and 245 million by the end of September 2024, blaming the loss of cricket rights in India. That is down from the 230 million to 260 million which Disney had been forecasting.3. Stocks set to edge higher; Disney soarsU.S. stock markets are set to open marginally higher Thursday, continuing the previous session’s sharp gains on the back of the weaker-than-expected inflation report.By 06:00 ET (10:00 GMT), Dow Jones futures were up 105 points, or 0.3%, S&P 500 futures were up 0.3%, and Nasdaq 100 futures were up 0.2%.The main Wall Street indices all closed with strong gains Wednesday, with the blue-chip Dow Jones Industrial Average rising over 500 points or 1.6%, the broad-based S&P 500 gaining 2.1%, and the tech-heavy Nasdaq Composite soaring 2.9%, closing at its highest level since late April.Helping the tone Thursday were strong results after the close Wednesday from Disney [see above], with the entertainment giant’s stock seen over 7% higher premarket.The earnings season continues Thursday, with reports from the likes of Rivian Automotive (NASDAQ:RIVN), Warby Parker (NYSE:WRBY), and Poshmark (NASDAQ:POSH) scheduled.Other companies in the spotlight include Sonos (NASDAQ:SONO) and Bumble (NASDAQ:BMBL), with both stocks sharply lower premarket after slashing their full-year guidance.4. PPI, Initial Jobless Claims data dueFollowing the excitement of Wednesday’s CPI release [see above], investors will be looking to the release of the U.S. producer price index for July for confirmation of a lessening of inflationary pressures.Producer prices increased more than expected in June, climbing 1.1% on the month, but are expected to have only climbed 0.2% in July as the extraordinary energy price rises stabilized. This still represents an annual rise of 10.4%, down from 11.3% the previous month.The PPI number is due at 08:30 ET (12:30 GMT), the same time as the release of the weekly initial jobless claims number.The number of Americans filing new claims for unemployment benefits increased last week by 6,000 to 260,000, suggesting some softening in the labor market.This softening is expected to continue, with the number of new jobless claims seen increasing to 263,000.5. Oil rises; IEA points to falling Russia outputCrude oil prices rose Thursday, boosted by renewed concerns about supply tightness following the publication of a report by the International Energy Agency.Russia’s oil output is set to fall roughly 20% by the start of next year as a European Union import ban comes into force, according to a market report from the Paris-based intergovernmental organization, with close to 2 million barrels a day shut in by the start of 2023.Oil is struggling to find direction as the market has yet to reach a consensus on the outlook for supply and demand.The market slipped back earlier Thursday on the resumption of flows through a key European pipeline, from Russia along the southern Druzhba network, as a payment dispute was resolved.U.S. crude inventories rose by 5.5 million barrels last week, according to data from the Energy Information Administration, released Wednesday. This is the second straight week of an unexpectedly large rise in U.S. oil stocks, suggesting weakening demand at the world’s largest consumer.By 06:00 ET, U.S. crude futures were up 1.2% at $93.00 a barrel, while Brent crude was up 1% at $98.39 a barrel. More

US petrol prices have dropped below $4 a gallon for the first time since Russia’s invasion of Ukraine, as fears of a looming recession put the brakes on soaring fuel markets, tempering rampant inflation.The average price of a gallon of gasoline tumbled to $3.99 on Thursday, according to motoring group AAA. That leaves the price at the pump down by a fifth since hitting record levels over $5 in mid-June, in the fastest decline since the 2008 recession.“It feels like a pretty big decline to go from a five to a four to a three,” said Patrick De Haan, head of petroleum analysis at GasBuddy, a price tracking service. “It’s good news for beleaguered motorists that were hit by record high prices this year.”The slide in prices is not confined to the US, as jitters over an impending global economic slowdown and a corresponding drop-off in driving offset some of the upheaval in oil markets triggered by the war in Ukraine. The Energy Information Administration has reported US petrol demand over the last four weeks has been running about 6 per cent lower than a year ago, at 8.9mn barrels a day. European prices have fallen 9 per cent from their June highs to €1.86 a litre ($7.32 a gallon), according to the latest European Commission data. In the UK, they are down 8 per cent to £1.76 a litre ($8.20 a gallon), according to the RAC motoring group. Heavier taxation in those jurisdictions, coupled with the strength of the dollar, mean the drop has been shallower than in the US.The rapid fall in American prices has helped to cool inflation. The US consumer price index rose at an annual rate of 8.5 per cent in July, decelerating slightly on the back of lower petrol prices.The US has one of the world’s highest car ownership rates, with around 92 per cent of households having access to at least one vehicle, according to the latest census, making petrol prices a prominent political issue. The country consumes about a fifth of the world’s oil despite being home to just 4 per cent of the world’s population.High petrol prices have become a political liability for US President Joe Biden, despite his limited ability to influence them. In response, the president has taken measures including releasing record volumes of crude oil from the country’s emergency stockpiles and leaning on producers to pump more supply. The price of diesel, used in industries such as trucking and agriculture, has also fallen sharply. It sat at $5.08 on Thursday, according to the AAA, down 12 per cent from $5.81 in June.The fall in prices is a sharp reversal from recent months. Prices at the pump were already escalating rapidly at the beginning of the year, fuelled by resurgent post-pandemic demand, when Russia’s invasion of Ukraine in February shook global oil markets and accelerated the climb. Brent crude, the international oil marker surged past $100 a barrel.By mid-June, soaring crude prices and tight global oil refining capacity market had pushed US petrol prices to $5.02 a gallon — their highest level ever level without adjusting for inflation. More

Daly’s remarks comes as U.S. consumer prices remained unchanged in July due to a sharp drop in the cost of gasoline, delivering the first notable sign of relief for weary Americans who have watched inflation climb over the past two years.In an interview with the Financial Times, Daly did not rule out a third consecutive 0.75% point interest rate rise at the central bank’s next policy meeting in September, however, she said that a half-percentage point rate rise was her “baseline”. (https://on.ft.com/3SEkQ7E)”There’s good news on the month-to-month data that consumers and business are getting some relief, but inflation remains far too high and not near our price stability goal,” the newspaper quoted Daly as saying during the interview conducted on Wednesday. She also maintained that interest rates should rise to just under 3.5 per cent by the end of the year, according to the report. The fed funds rate, the rate that banks charge each other to borrow or lend excess reserves overnight, is currently in the 2.25%-2.5% range.Slowing U.S. inflation may have opened the door for the Federal Reserve to temper the pace of coming interest rate hikes, but policymakers left no doubt they will continue to tighten monetary policy until price pressures are fully broken.The Fed is “far, far away from declaring victory” on inflation, Minneapolis Federal Reserve Bank President Neel Kashkari said at the Aspen Ideas Conference, despite the “welcome” news in the CPI report.Kashkari, the Fed’s most hawkish member, said he hasn’t “seen anything that changes” the need to raise the Fed’s policy rate to 3.9% by year-end and to 4.4% by the end of 2023. More

The legislation, which passed the Senate over the weekend with no Republican support, increases the IRS budget by about $80 billion over 10 years.Democrats say beefing up IRS enforcement will increase tax collection and help pay for the $430 billion bill, which tackles climate change and lowers prescription drug costs for seniors, among other provisions.Republicans have criticized the additional funding for IRS tax enforcement, saying the agency will not just focus on wealthier taxpayers but also go after middle-class families.Yellen told IRS Commissioner Charles Rettig in a letter released by the Treasury Department that any new IRS personnel “shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.”The IRS is a bureau of the Treasury Department.Yellen said, “contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.”The House of Representatives is expected to vote on the bill on Friday. President Joe Biden has said he would sign it into law. More

Good morning. Motorists in the US will be cheering the news today that the average price of a gallon of gasoline has dropped to $3.99, tumbling from a record high of more than $5 in mid-June, according to AAA. Cheaper US petrol has helped to rein in high inflation. Data on the Consumer Price Index showed that inflation rose 8.5 per cent in July from a year earlier, a slower uptick than had been expected, and a lot lower than the June rise of 9.1 per cent. Signs that the world’s biggest economy could be past the peak of super-hot inflation offered some comfort to the Federal Reserve, which has been on a campaign to cool price surges by raising interest rates. But Mary Daly, president of the San Francisco branch of the Fed, said it was not enough for a victory lap. Inflation is still way above the bank’s 2 per cent target rate, and “core” prices — which strip out volatile items such as energy and food — rose in July at an unchanged pace of 5.9 per cent year on year. Daly told the Financial Times that another rate rise in September was still on the table. The prospect of lay-offs is also giving policymakers a headache. From Netflix to Walmart, businesses have warned of job cuts even as, a little confusingly, unemployment has dropped to a record low. Why are so many jobs under threat? Thanks for checking in with FirstFT Americas today, see you tomorrow — GeorginaFive more stories in the news1. Donald Trump pleads the Fifth in New York state probe The former US president refused to answer questions at a deposition in a New York state probe into his businesses yesterday, invoking his constitutional right against self-incrimination amid deepening legal woes.2. Fox predicts record political ad spending in US midterms Fox Corporation chief Lachlan Murdoch has predicted that the November midterm election cycle will be the most lucrative in US history, outstripping the $12bn of spending in the 2020 Trump election year. 3. US charges Iranian national with plot to murder John Bolton Federal prosecutors said they believed 45-year-old Shahram Poursafi, a member of Iran’s elite Revolutionary Guards who also goes by the name Mehdi Rezayi, had plotted to assassinate Donald Trump’s former adviser. 4. Credit Suisse steps up legal claim against SoftBank The Swiss lender has intensified its legal fight against the Japanese tech investor as it seeks to recoup hundreds of millions of dollars on behalf of its wealthiest clients that it had lent through the defunct Greensill Capital.SoftBank gain: The Japanese group is expected to post a gain of more than $34bn by turning over a chunk of its holdings in Chinese ecommerce group Alibaba.5. Disney adds 14.4mn streaming subscribers Walt Disney defied concerns about an industry slowdown by adding subscribers to its Disney Plus service in the latest quarter, pushing its total number of paying customers to 221mn. But the media group reduced its long-term guidance due to its loss of rights to stream Indian Premier League cricket matches.The day aheadUS jobless claims New applications for unemployment aid are estimated to have tallied 263,000 in the week that ended August 6. Producer price index figures PPI, which tracks the prices that businesses receive for their goods, is forecast to have risen 0.2 per cent in July from the previous month, according to analysts polled by Refinitiv. The annual increase in July is expected to have decreased slightly from June. Mexico interest rate decision Mexico’s central bank is expected to raise its benchmark interest rate 0.75 percentage points to 8.5 per cent at its monetary policy meeting this afternoon.Corporate earnings Companies due to report earnings include Brookfield Asset Management, theme park company Six Flags and Canada Goose. Earlier, Siemens reported its first quarterly loss in nearly 12 years, after it was forced into a multibillion-euro write down on its spun-off energy business and wound down its 170-year-old operation in Russia. Electric carmaker Rivian and media group Endeavor are reporting after the bell.Golf’s PGA tour playoffs begin A US judge has denied a request from three professional golfers to play in the first event of the playoffs in Memphis, Tennessee, after they defected this summer to the LIV Golf circuit, a start-up league backed by Saudi Arabia’s sovereign wealth fund.Russian crude restored to southern Druzhba pipeline Hungarian energy company MOL has paid oil transit fees to Ukraine on behalf of a Kremlin-controlled company in order to restart flows of crude. The Energy Information Administration and Opec also publish their monthly oil market reports.The Climate Graphic: Explained is a must-read guide to the climate emergency, produced by our specialist data visualisation and environmental reporting teams. Sign up to the weekly newsletter here.What else we’re readingWhatever happened to Mandela’s dream for South Africa? In the latest Rachman Review podcast, Gideon talks to the South African writer and political activist, Songezo Zibi, about the need to build a coalition for change to help restore some of the high hopes that accompanied the end of apartheid.Social media’s big bet: shopping revolution will be livestreamed Internet platforms including TikTok, YouTube and Amazon are declaring live ecommerce as the future of retail. But early experiments in the UK and US suggest there is still a long way to go to overcome low viewing numbers, poor sales, clunky tech and logistical challenges.In praise of boredom The last time Jemima Kelly was truly bored was a year ago, during a seemingly never-ending church service in France. But after the ordeal was over, she noticed that her feelings of pleasures had intensified. Boredom, it turns out, could help our ultra-connected lives.Germany’s economy stutters The country’s prospects have become “fragile”, according to its finance minister, with growth forecasts downgraded and life becoming “much more expensive for lots of people”. Here’s how the eurozone’s powerhouse became a weak link.What next for Brittney Griner — and for women’s sport? Griner is currently the most famous basketball player in the world, not for her two Olympic gold medals or her five professional championships across the EuroLeague and the WNBA, but because she’s become a political pawn.Remembering a truly modern iconFollowing the news of the death of Issey Miyake in Tokyo on August 5 2022 at the age of 84, take a tour around the fashion designer’s inimitable creations through the eyes of his fans, who praised the clothing’s inclusivity and “malleability”. More

How much could your household finances be squeezed in the next few years? The answer could well come down to the size of your mortgage.If you’ve borrowed a lot of money to buy your dream home, rising interest rates have the potential to curb the spending power of the middle classes much more than rising energy bills have done so far. I have a friend who has been paying an extra £500 a month on her mortgage since she rolled off a fixed-rate deal. She needs to move house in a year, for school-related reasons, so didn’t want to lock into another fix. When the Bank of England increased the base rate by half a percentage point last week — the biggest rise in 27 years — she sent me a WhatsApp message saying “Arrrrrrghhhh”. Most UK borrowers have locked into a fixed rate, but about 1.3mn will expire this year and 1.81mn next year, according to trade body UK Finance. Bank of England data shows more than £10bn was overpaid on mortgages in the first six months of this year — a trend evidenced in FT Money’s bonus survey in February, where 13 per cent of respondents said this was your intention. Soaring property prices, bigger mortgages and lengthier repayment terms mean that even a small change to interest rates will increase the lifetime costs of your home loan. Here are some points to consider well in advance of when your current fix comes to an end.Get your paperwork in orderAnyone with a fixed mortgage needs to plan for what to do when it expires. Find the date, ring it in your diary and be ready to start looking for a new deal at least six months beforehand.“The amount of mortgage applications lenders are getting are still at very high levels, and we’ve seen two or three pause taking on new business while they get back up to speed,” says Andrew Montlake, managing director at mortgage broker Coreco.He has heard stories of customers waiting three to four weeks to get a mortgage review appointment, by which time interest rates have risen. If you’re sticking with the same lender, remortgaging deals — known as retention products — can’t usually be secured until you have less than four months remaining. But if you’re switching to a new lender, it’s often possible to “lock in” a rate six months ahead of your current deal expiring. Expect to pay about £500 for an independent mortgage broker to help you find the best deal for your circumstances. Careful preparation should mean you avoid the misery of reverting to your lender’s standard variable rate (SVR). The average SVR is already 5.17 per cent, according to Moneyfacts, the price comparison site. This figure has increased for eight consecutive months and is likely to swell further, adding up to a huge payment shock for those who roll off a fix. How long to fix for?You won’t thank me for saying that the best time to fix your mortgage was six months to a year ago. Five-year fixes are still the most popular product, but the average rate offered on these deals breached 4 per cent in August, according to Moneyfacts — a level last seen in 2014. The average two-year fix is a shade under this at 3.95 per cent. The more equity you have in your home, the better the rate you will be able to secure. However, deals with the lowest rates tend to have the highest fees (typically £1,000 or more). Add the fees to your loan, and you’ll be paying interest on top. Mortgage brokers report early signs that more borrowers are prepared to gamble on a two-year fix, betting that central banks will be forced to cut rates in a recession. High-profile US investors Cathie Wood and Ray Dalio have both said they expect to see rate cuts in 2023-24. However, non-billionaires are likely to value the certainty of a fixed rate on their biggest monthly outgoing. Be prepared to make a quick decision Whether you’re buying a home or remortgaging, speed is of the essence. The average mortgage product has an average shelf life of just 17 days, according to Moneyfacts — an all-time low.

If a lender’s rate moves to the top of a best buy table, they will often withdraw it swiftly to avoid the operational challenge of a deluge of applications. “I could give a client one rate at 9am, then have to call back at noon and say that deal is being withdrawn at 5pm today,” says Coreco’s Montlake. “Some clients think it’s a sales technique but that is the reality of the market.” Should you pay to nix your current fix?With rates ticking up, you may be tempted to pay a penalty to quit your existing deal and lock into a new one. As a rule of thumb, early repayment charges on a five-year fix are 5 per cent of the outstanding balance in the first year, falling on a sliding scale to 1 per cent by the final year. If you break a fix on a £500,000 mortgage with two years left to run, that could cost you £10,000, plus product fees for the new mortgage — and your monthly repayments would instantly be higher. Is it worth it? A free mortgage calculator from budgeting app Nous.co attempts to answer this question based on market predictions about where interest rates could be by the time your fix ends and what the likely costs or savings could be. I’d also use a mortgage overpayment calculator to see what impact using that cash to make a one-off repayment could have, assuming your mortgage deal allows this, and whether this could tip you into a lower LTV. Sprive, a new app, allows people to vary their overpayments in accordance with their monthly spending. What about buy-to-let mortgages? Landlords are more likely to have interest-only mortgages. Though most are locked into fixed-rate deals, this means they will be exposed to much bigger cost swings than repayment borrowers when rates expire. Lenders apply a range of affordability calculations to buy-to-let loans. The main one is the interest coverage ratio — the monthly rent expressed as a percentage of your monthly interest payment — typically 125 to 145 per cent. However, lenders use a “stress rate” to calculate these ratios and this is much higher than the actual interest paid on the loan. David Hollingworth, associate director at broker L&C Mortgages, notes that several lenders have increased their stress rates this month, and expects others to follow. “The upshot will be landlords need to charge higher rents to borrow the same amount,” he says.For example, Metro Bank has just upped one of its stress rates from 4 to 5.5 per cent, and demands interest cover of 140 per cent. On a £200,000 interest only mortgage, he calculates this would mean landlords require an extra £350 of monthly rental income to satisfy the lender’s requirements.As we’ve been hearing on the Money Clinic podcast this week, renters are already finding these higher costs are being passed on to them, with London letting agents reporting rent rises of 40 per cent on the renewal of tenancies.

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However much rising mortgage rates make you want to scream, just be grateful that you own your home. Claer Barrett is the FT’s consumer editor: [email protected]; Twitter @Claerb; Instagram @Claerb More