UK government borrowing costs fall as City welcomes ‘no harm’ budget – business live

Mortgage approvals across the UK sank to a near three-year low last month, while consumer lending grew at the fastest rate in eight years. British ⁠lenders approved 53,443 mortgages ⁠for ⁠house purchase in September, the ⁠lowest number since December 2023, ⁠according to the latest Bank of England money and credit data. UK mortgage approvals for house purchase fell to 53,443 in September 2026, down 2.5% month-on-month and down a rather more troubling 19.4% year-on-year. Economists polled by ⁠Reuters had expected mortgage approvals to dip to 54,000. Anthony Codling, who heads up equity research on UK housebuilders and global building materials at RBC Capital Markets, said: This marks the third consecutive monthly decline, an unwelcome hat-trick, making Halloween for housebuilders more trick than treat, and takes approvals to their lowest level since December 2023. The current run-rate sits 10.8% below the five-year average and 16.9% below the ten-year average, pointing to demand that remains stubbornly subdued. The value of approvals fell even faster, down 4.9% month-on-month and 17.7% year-on-year to £13.7bn. The UK housing market is not a market with positive momentum, happy Halloween. Mortgage lending fell to £3.9bn in September, from £4.2bn in August, below the previous six-month average of £4.9bn. Consumer lending ‌grew ‌at an annual rate ‌of 9.8%, the fastest rate since April 2018. However, consumer credit fell on a monthly basis, to £1.9bn in September from £2.7bn in August. Credit card lending slowed to £700m from £1.3bn while other borrowing such as car dealership finance and personal loans declined to £1.2bn from £1.4bn. Volkswagen has slumped to its biggest loss in more than a decade in the latest quarter, as Germany’s largest carmaker suffered from falling sales in China. The Wolfsburg-based carmaker lost €4.2bn (£3.5bn) before tax between July and September, the highest since the end of 2015, it said on Thursday. Its operating loss was €5.8bn, driven by a previously announced impairment of €6.4bn on its stake in the Porsche sportscar subsidiary, and another €1bn on its Chinese operations. Sales in the first nine months of 2026 fell 11% to 5.9m, with a “shrinking” market in China to blame, according to Arno Antlitz, Volkswagen’s chief financial officer. Antlitz said the company’s earnings were “too low to continue investing strongly in our future”. Volkswagen, which used to vie with Toyota to be the world’s largest carmaker, is cutting as many as 100,000 jobs, many of them in Germany, as it tries to turn itself around and fight back against the wave of Chinese manufacturers that dominate the electric vehicle industry. Volkswagen blamed its decline in profitability on a long-running price war in China that is spilling into other markets around the world, as well as the increased share of lower-margin electric vehicles. However, Micheal Dean, senior autos analyst at Bloomberg Intelligence, said the carmaker’s guidance suggested a “sharp rebound” was likely in the last three months of 2026 after a “messy” third quarter. He said: An 11% higher European order book and Audi recovery underpin the 4Q improvement and bode well for 2027 as restructuring savings build, helping offset China weakness, BEV [battery electric vehicle] mix margin dilution, rising costs and negative pricing. Britain’s hospitality sector has breathed a sigh of relief after the budget. Premier Inn owner Whitbread said this morning that the ⁠budget will significantly ease its cost burden, and now expects ⁠its business rates ⁠bill to be as much as £60m lower over the next couple of years. John Healey froze the level of ‌business rates paid by hospitality, leisure and retail businesses for two years, until 2028, so that no property faces an above inflation increase. Whitbread, one of the hospitality sector’s most vocal critics of last year’s budget, was facing a hefty increase in costs due ‌to the sharp rise in business rates announced by Healey’s predecessor Rachel Reeves. Here are some more ⁠details: Whitbread expects its total business rate payments to rise by just £7.5m ⁠to £12.5m over the coming year, against its previous estimate of £35m, with a similar benefit the following year. It expects business rates payments to be between £45m and £60m lower than previously expected by fiscal 2029. Dominic Paul, the chief executive, expressed relief: The business rate measures announced in the UK budget will do much to mitigate the damaging impact of the past two budgets on the hospitality sector, and we are grateful that the government has listened to our concerns. Limiting the increase in business rates over the next two years to inflation, together with a more reasonable increase in the national living wage and national minimum wage, will make a significant difference to our business. This provides further momentum as we execute our five-year plan which is on track to deliver a material increase in margins, cashflow and returns for shareholders. John Healey said on Wednesday that higher inflation and interest rates had hit the government’s finances, ratcheting up the government’s interest bill by £14bn this year alone, but promised to stick to Labour’s fiscal rules. The Office for Budget Responsibility (OBR) said the chancellor would meet the most important rule – to balance day-to-day spending with tax revenues – with a diminished headroom of £15bn by the target date of 2029-30, against the £24bn his predecessor Rachel Reeves had built up in the spring. Borrowing is scheduled to be higher than expected in the short term, but the chancellor promised to rebuild the buffer against the rules to £22bn by the end of the five-year forecast period. Investors and analysts said the budget left Britain’s fiscal outlook largely unchanged, which explains the muted impact on financial markets. Barclays currency strategist Lefteris Farmakis said: A ’continuity budget’ with fiscal headroom upside potential pushes the pound’s perceived fiscal risks to the background. Matt Tickle, chief investment officer at the insurance group Howden Employee Benefits, said: The new chancellor has successfully navigated his first budget without spooking gilt markets. Albeit, that is partially thanks to helpful changes to OBR growth assumptions, which have offset the falling fiscal headroom due to rising yields. We should also remember that the substantial changes have been pushed back to the 2027 spending review. The chancellor was facing an uphill struggle given elevated bond yields seen in both the UK and across the G7. Bond yields will continue to face short term headwinds from global events in the spectre of rising energy prices and knock-on effects to broader inflation. However, the combination of fiscal discipline and the Bank of England’s sensible overhaul of its quantitative tightening program should support lower gilt yields over the medium term. We remain positive on gilts over a two-year timeframe. The pound is steady and gilt yields dipped, a day after John Healey delivered a cautious set of tax and spending plans in his maiden budget to help households hit by “global economic storms,” as he put it, which had little impact on markets. The stock market has risen, with the FTSE 100 index 42 points ahead at 10,736, a 0.4% gain. Shell is the top riser, up 3.2%, after profits in the latest quarter doubled. Sterling – the best performing major currency against the dollar this month with a 0.5% gain – dipped 0.1% against the greenback to $1.3310. It has gained a similar amount against the euro in October. Government borrowing costs also eased. The yield on the 10-year benchmark gilt dipped 3.7 basis points to 5.308% this morning while two-year, five-year and 30-year yields are also down. Jonas Goltermann, chief markets economist at Capital Economics, said the “No harm” budget has kept gilts out of the firing line. The UK budget announcement has proven the non-event that newly-minted chancellor Healey had signalled in advance. While his first budget is hardly inspiring, it contrasts favourably with the initial efforts of some of his recent predecessors. By sticking to a gradual fiscal tightening path, and to the expectations set over the past couple of months for a muddle-through budget, Healey has probably done enough to keep the gilt market on side for now. We think that gilt yields will fall over the coming year as the UK’s fiscal risk premium remains contained and the Bank of England policy takes a less hawkish path than money markets discount. The chancellor said he will raise taxes on banks, gambling, savers and landlords, while also tightening VAT rules for online marketplaces. Its £4.4bn cost of living support package has been criticised as “badly targeted” by the Resolution Foundation this morning, though. Speaking on BBC radio 4’s Today programme this morning, Healey vowed to cut the welfare bill before the next election, with a “tough” approach to young people who do not accept support to get a job or training. Lloyds Banking Group’s chief financial officer William Chalmers said the bank hopes that the tax increase on banks announced in the budget is a “temporary measure,” as the lender’s quarterly profits doubled. John Healey used the budget to double the additional levy banks pay on their profits, to 6%. The additional bank tax will only last for 15 months and marked a less significant rise than some in the industry had feared. Banks’ share prices were among the highest risers in the blue chip FTSE 100 index on Wednesday. This morning, the Lloyds share price fell as much as 6% in early trading, and is now down 3.1%, despite the bumper results. Jefferies analysts say revenue missed expectations by 1%, and the net interest margin was also below forecasts. The bank’s pre-tax profits in the latest quarter doubled to £2.3bn, with a 10% rise in net interest income, as the bank continues to benefit from higher interest rates. The figure was flattered by a £800m hit it took on motor finance provisions this time last year which was not repeated, thereby boosting the year-on-year comparison. Chalmers said: We lend out 99 pence of every pound we receive in deposits and our ambition is to do more. In this context, we know that the increase in the surcharge announced by the chancellor yesterday, we recognise that tax is a matter for the government. The fiscal environment is challenging. Ultimately, it is important that the UK banking sector is able to deliver banking services to businesses and households and communities in a cost effective way. In order to promote UK growth, it is also important that the sector is internationally competitive and not disadvantaged compared to other financial centres. Additional taxes make both of these objectives harder to achieve. We therefore very much hope that yesterday’s tax increase is indeed a temporary measure to help ensure the business environment remains consistent with supporting long term investment. Richard Hunter, head of markets at the trading platform interactive investor, said: With provisions for the motor finance investigation all now but buried and with higher income flowing through, Lloyds has enjoyed a bumper quarter which puts the bank in prime position to meet its full year targets. Some of the clouds which have been overhanging the sector leading up to the budget, and the domestic banks in particular, have now partially parted. The increase to the bank surcharge was less than feared, manageable and temporary and led to a small relief rally in Lloyds’ shares yesterday. Other concerns also remain on the back burner, with the level of defaults and arrears low and stable, although in typically conservative fashion Lloyds has increased impairment provisions for the quarter to £313m, or £930m in the year to date. This of course anticipates potential rather than actual losses, such that releases are possible in the future should the bad debts fail to materialise. The higher figure is based on several scenarios, such as the inflationary impact of the Middle East crisis, lower GDP growth in the UK, a rise in unemployment and limited gains in residential and commercial property prices. Even so, at the moment, there are few if any signs of deterioration across its lending book. Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. The £4.4bn cost of living support package delivered by John Healey’s budget on Wednesday is “badly targeted,” which means that even families receiving help face higher energy bills than during the last energy price shock, according to the Resolution Foundation. The poorest half of households will gain £158, on average, from support measures this year and next – just £14 more than the £144 received by the richest half – highlighting a “complete failure to target help at those who need it most,” the think tank said. Typical energy bills net of support are forecast to be £1,750 this year (2026-27) – higher in real terms than during the last energy price shock (2022-23) when net bills were £1,685. The chancellor raised taxes on banks and landlords to fund a £100 winter handout for 20 million families as official forecasts made clear there is no end in sight for the cost of living crisis. The Resolution Foundation’s analysis found that UK tax rises stand out globally. The UK’s internationally remarkable consolidation in its public finances, touted by the chancellor in his budget speech, is entirely due to a rising tax take during the current parliament. The £76bn improvement in the UK’s primary balance – the gap between receipts and non-interest spending – between 2023-24 and 2028-29 is more than fully accounted for by £107bn of higher tax revenues. Whitehall gets a bigger boost than households. The budget included a £9bn top up to departmental budgets over the current spending review period – twice as much as the £4.4bn cost of living support package. Past gain, future pain for living standards. Median real annual disposable incomes for working age households are set to grow by a paltry £600 over the course of the Parliament. Worse still, those gains are already behind us. Between now (2026-27) and the end of the parliament (2028-29), typical incomes are forecast to fall by £1,050 (3%). Ruth Curtice, chief executive of the Resolution Foundation, said: Faced with a tough backdrop amid global economic turmoil, the chancellor delivered a scattergun budget that did little to address the sharp challenges facing Britain. Cost of living support is being spread far too thinly and will leave even those families receiving help facing higher energy bills than they did during the last energy price shock. Stepping back, this parliament is increasingly looking like one of two halves, which yesterday’s budget did little to address. The first half has been marked by rising living standards, solid economic growth and extra funding for public services – funded by huge tax rises – none of which was enough to prevent dramatic half-time substitutions in Downing Street. The new occupants will hope for better political fortune in the second half, but it could prove tough going against a projected £1,000 fall in disposable incomes. A more dramatic change of tactics may be needed, and we did not learn how the government will choose between public service ambitions and household incomes. Next year the choices will unavoidably get starker. The US Federal Reserve left interest rates unchanged on Wednesday during its last board meeting before the midterm elections, keeping rates at one of the highest pre-election levels seen in over 20 years. Two out of 12 board members voted against the pause, preferring to raise rates by a quarter point this meeting, the Fed board said. During a press conference on Wednesday afternoon, the Fed chair, Kevin Warsh, told reporters that the upcoming election played no role in deliberations. Today, the European Central Bank is also expected to keep rates unchanged at the end of its meeting. The decision is expected to be overshadowed by questions about bond-market turmoil in France and ECB president Christine Lagarde’s future. The eurozone’s central bank has already raised ⁠rates twice since June and is expected ⁠to hike further in the coming months as policymakers seek to prevent an oil-price shock linked to the Iran war from feeding into other prices and wages. The UK oil and gas giant Shell doubled quarterly profits to $10.8bn between July and September, the highest since 2022, after the Middle East conflict led to energy shortages and drove up the price of oil and gas. The company said this morning that it will hand back more cash to shareholders, lifting its quarterly share buyback programme to $5bn from $3bn. In financial markets, oil prices have fallen amid hopes for fresh peace talks. US vice president JD Vance sought to revive negotiations by sending a letter to the Iranian Security Council chief Mohsen Rezaei, the Wall Street Journal reported. Brent crude, the global oil benchmark, declined 0.6% to $114.62 a barrel. The Agenda 9am GMT: UK joint water regulator report on company performance 9.30am GMT: Bank of England consumer credit and mortgage approvals for September 10am GMT: Eurozone consumer confidence for October 10.30am GMT: Institute for Fiscal Studies verdict on UK budget 12.30pm GMT: US GDP for third quarter 1.15pm GMT: European Central Bank interest rate decision 1.45pm GMT: ECB press conference