Confidence in the major UK banks is at an all time low. Since the Financial Crisis in 2009, bankers have been accused of taking excessive risks and rewarding themselves with excessive pay and bonuses. The integrity of the banking sector has also been called into question following the recent Libor rate scandal and HSBC’s failure to comply with US sanctions over Iran. Last week, Standard Chartered has hit the news with similar allegations that the bank laundered money for Iranian clients.
The banking sector is clearly in need of a shake up as a strong banking sector could well be a catalyst for an economic recovery. Over the past year or so we have seen some new entrants to the banking sector. Metro Bank opened some new branches in the UK and is slowly expanding its base; the Co-op has acquired 600 branches from Lloyds and more recently, two retailers have entered the scene. Last month, Marks & Spencer launched it’s current account and last week Tesco introduced a range of mortgages. At present the new retailers are not offering anything out of the ordinary. None of Tesco’s deals are the best in their class and buyers will require a 20% deposit while rates range from 3% to 5%. However, the increase in competition is welcome and is healthy for the industry.
House prices in the UK have fallen in July (with the exception of Central London) and banks are beginning to offer more competitive rates. HSBC are now offering a 2.88% mortgage but buyers must have a 40% deposit. There are concerns over reduced demand for expensive homes in the UK due to the increased taxes proposed in George Osborne’s latest budget. The new 7% stamp duty on properties over £2m together with additional taxes for properties owned through a company will affect wealthy individuals in the UK.