Lending data, US earnings season season, and the FTSE 100 gets a boost

interactive investor experts comments on statistics from the Bank of England, the housing market, and more.

Victoria Scholar, Head of Investment, interactive investor, says: “European markets are trading in positive territory across the board with the FTSE 100 up by around 0.75% with upward momentum carried forward from the Asia and US trading sessions on the back of strong inflation data from China and the US. To combat higher price levels, the Federal Reserve last night confirmed in its meeting minutes that tapering could begin as soon as November.

“Earnings season continues to take centre stage stateside with results from Bank of America (NYSE:BAC), Citigroup (NYSE:C), Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC) due before the bell. Although JPMorgan reported a third-quarter beat on Wednesday, the stock ended the session lower with financials weighing on the S&P and the Dow. In today’s quarterly scorecards, focus is likely to be on this year’s M&A boom, reserve releases and costs associated with spending on technology and wages.”

Bank of England lending data

On the Bank of England lending data, Victoria Scholar, Head of Investment, interactive investor, adds: “The Bank of England’s survey highlights that UK lenders expect the available supply of secured and unsecured consumer credit to increase in the fourth quarter. On the demand side, the picture is more mixed with lending for mortgages seen falling in the fourth quarter, while demand for credit cards is expected to rise in the run-up to Christmas. Perhaps more worryingly, UK lenders expect default rates for secured and unsecured consumer borrowing to rise in the final quarter as the cost-of-living crisis takes its toll.

“The prospect of higher interest rates, the end of the furlough scheme, a cut to Universal Credit and rising inflation could contribute to the potential increase in default rates among consumers. The pound continues to make headway in today’s trade, pushing above $1.37 scaling two-weeks highs amid rising expectations of a rate hike this year from the Bank of England and support from the hope that the EU and UK might agree on changes to the Northern Ireland protocol.”

Personal finance comment

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “During the pandemic, the housing market has been propped up by the stamp duty holiday, cheap mortgage deals, and a desire for fresh and more spacious surroundings. While demand for property remains strong, the scaling back of the stamp duty holiday carrot as well as the pressures of the rising cost of living and seemingly impending increases in taxes are significant contributing factors to a wane in demand for mortgages in September.

“But there is little respite when it comes to house prices, with average prices in September hitting a record £267,587. A demand-supply mismatch, with the supply of family homes particularly stretched, and continued low borrowing rates are likely to sustain the trend of high average prices for some time to come.

“An uptick in the demand for loans in September suggests that while the light at the end of the Covid tunnel is now in sight, many still find themselves in a financially precarious position. The end of the furlough scheme and the £20 uplift to Universal Credit and Working Tax credits exacerbates matters for the nation’s most vulnerable.

“The importance of paying closer attention to your financial well-being and taking some time to plan ahead to help fortify your finances against the rising cost of living - rises to energy bills included - still rings true.”

• Lenders reported that demand for secured lending for house purchase decreased in Q3, and was expected to decrease further in Q4. Demand for secured lending for remortgaging increased in Q3, and was expected to increase further over the next quarter.
• Lenders reported that overall demand for unsecured lending increased in Q3, across both credit cards and other unsecured lending, and was expected to increase further in Q4.