Bank of England says UK banks can increase riskier mortgage lending

The Guardian

09-07-2025

Update:
Date: 2025-07-09T09:46:51.000Z
Title: Copper prices in US hit record high after Trump announces 50% tariff
Content: Rolling coverage of the latest economic and financial news, as BoE recommends banks can issue more high loan-to-income level loans
Trump threatens to escalate trade war amid confusion over new tariff rates
Graeme Wearden
Wed 9 Jul 2025 11.46 CEST
First published on Wed 9 Jul 2025 08.40 CEST
From
11.41am CEST
11:41
Newsflash: The Bank of England is recommending that lending rules are relaxed so that banks and building societies can issue more mortgages at high loan-to-income levels.
The BoE's Financial Policy Committee is recommending that individual lenders should be allowed to increase their share of lending at high LTIs to above the current limit of 15%.
This could make it easier for borrowers to stretch themselves to afford a more expensive property.
High loan-to-income loans are defined as those at a ratio above 4.5. Loans above this level are riskier, as borrowers could struggle to meet mortgage payments if their incomes fell, or if interest rates rose.
Announcing the plan, the FPC says:
The Committee noted its role in supporting the Government's priority to make home ownership more accessible and discussed the UK housing market and the role of regulatory mortgage policies.
It wants the overall lending market to restrict high LTI loans to 15% of total demand, while allowing individual lenders to exceed it. The loan-to-income lending limit was introduced in 2014, as part of a package to cool the housing market.
The FPC says:
The Committee noted that the original policy intent of the LTI flow limit recommendation was to ensure the flow of new residential mortgages at high LTIs did not exceed 15% of total new mortgages in aggregate.
The FPC judged that the aggregate 15 per cent limit continued to strike the right balance between providing appropriate protection from the increased risk to economic growth of large cuts to consumption associated with an over-indebted household sector, while providing sufficient capacity for otherwise creditworthy households to borrow at higher LTIs.
As such, it has recommended the Prudential Regulation Authority (PRA) and the FCA amend implementation of its LTI flow limit to allow individual lenders to increase their share of lending at high LTIs while aiming to ensure the aggregate flow remained consistent with the limit of 15%.
Updated
at 11.46am CEST
11.19am CEST
11:19
Here's our news story about the jump in the US copper price:
11.15am CEST
11:15
The oil price has hit its highest level in two weeks, after a cargo ship attacked in the Red Sea sank.
The Eternity C cargo ship sank in the Red Sea following an attack on Monday, blamed on Yemen-Houthi militants, which killed at least four crew members.
Brent crude has risen by 0.6% today to $70.71 per barrel, the highest since 23 June.
11.03am CEST
11:03
Tom Bailey, head of research at HANetf, has warned that the threat of copper tariffs is leading to more of the metal becoming 'trapped' in warehouses, rather than being used.
Bailey explains that this could distort prices for this vital metal:
Copper sits at the centre of a looming supply-demand crunch. On one side is surging demand driven by grid upgrades, the rapid buildout of AI data centres, and the ongoing urbanisation of emerging markets. On the other is a supply base that is ageing, expensive, and increasingly unreliable. Ore grades are declining, discoveries are rare, and new mines take over a decade to come online.
'However, tariffs mean that a new dynamic is potentially emerging: trapped copper. With tariffs looming, US buyers have rushed to bring in copper ahead of schedule. But much of this metal is not being consumed. Instead, it is sitting in warehouses or locked in financing agreements. Due to high US premiums, it is uneconomical to export. In practice, this copper is being stranded inside the US, unavailable to the rest of the world.
The result could be distorted physical markets, with those outside the US forced to compete for a shrinking pool of freely available copper.
10.55am CEST
10:55
German chancellor Friedrich Merz is optimistic that the European Union can agree a trade deal with the United States by the end of this month at the latest.
Merz told lawmakers on Wednesday:
'Our goal is to reach a trade agreement with the United States of America as quickly as possible that links mutual trade between America and the European Union with the lowest possible customs duties.'
Merz added that he is in close contact with US president Donald Trump and the European Commission.
10.41am CEST
10:41
Shares in some European pharma companies have dropped this morningn, after Donald Trump threatened to implement up to 200% tariffs on imported pharmaceuticals.
The falls are modest, though, after Trump also said he would give drugmakers about one year 'to get their act together'.
In London, AstraZeneca's shares have dipped by 0.77%.
Switzerland's Novartis has lost 0.8%, while Belgium's UCB has dropped by 1.75%.
Dan Coatsworth, investment analyst at AJ Bell, says:
'The pressure is now on for drug companies to expand US production facilities so they are effectively on the doorstep of American customers. Boosting the manufacturing sector and creating more jobs is central to Trump's tariff strategy, and the likes of AstraZeneca already have plans in motion to expand their US footprint.
10.21am CEST
10:21
Carsten Menke, Head of Next Generation Research at Julius Baer, says the copper tariffs will be inflationary domestically in the US and deflationary internationally – which matches the price action we've seen since last night.
Menke also points out that the jump in US copper prices (13% yesterday) is less than the 50% tariff, implying traders expect some imports will be exempt, saying:
President Trump announced the imposition of 50% import tariffs at a cabinet meeting yesterday. While US-traded futures jumped on the news, the price differential is well below the tariff level, pointing to expectations of exemptions for key suppliers or expectations of different demand dynamics.
As already mentioned, we remain of the conviction that the tariffs will be inflationary domestically in the US and deflationary internationally. Generally, we do not see a supply-constrained market, but we want to wait for the dust to settle before reassessing our outlook.
Updated
at 10.28am CEST
10.07am CEST
10:07
Donald Trump's trade war has helped nudge Malaysia's central bank into cutting interest rates.
The Monetary Policy Committee (MPC) of Bank Negara Malaysia has cut its policy rate by a quarter of one percentage point, to 2.75%, today.
Malaysia's MPC cited 'tariff developments' (Trump announced a 30% tariff on imports from Malaysia this week), saying:
The latest indicators point towards continued expansion in global growth, supported by sustained consumer spending and to some extent, front-loading activities. The global growth outlook would remain supported by positive labour market conditions, less restrictive monetary policy and fiscal stimulus.
This outlook is weighed down by uncertainties surrounding tariff developments, as well as geopolitical tensions. Such uncertainties could also lead to greater volatility in the global financial markets and commodity prices.
9.40am CEST
09:40
The European Union is working closely with Donald Trump's administration to reach a trade deal, but Brussels is getting ready for all scenarios, European Commission President Ursula von der Leyen has told the European Parliament this morning.
Von der Leyen said:
'We stick to our principles, we defend our interests, we continue to the work in good faith, and we get ready for all scenarios.'
Yesterday, Trump said the EU were now being 'very nice to us', and indicated that the US was 'probably two days off' from sending Europe a letter on tariffs.
9.34am CEST
09:34
In the short term, copper prices are expected to remain volatile as markets adjust to the new tariff landscape, predicts Daniela Sabin Hathorn, senior market analyst at Capital.com, who explains:
Factors contributing to this volatility include potential shifts in global supply chains, as exporters may redirect copper shipments to other markets, and the possibility of retaliatory measures from affected countries. Additionally, the U.S.'s limited domestic smelting capacity could influence price dynamics, as the country currently imports about half of its copper needs.
Ultimately, the dramatic rally in copper was triggered by a policy shift that caught the market off guard. The U.S. government's move to impose steeper-than-expected tariffs has introduced a new layer of uncertainty into an already sensitive commodities landscape. With President Trump's trade strategy known for sudden pivots, traders would be wise to stay alert for further developments that could reshape the outlook once again.
9.21am CEST
09:21
Shares in advertising giant WPP have slumped by 13%, after it slashed its forecast for revenues and profits this year and blamed a 'challenging economic backdrop'.
WPP warned that 'continued macro uncertainty' was weighing on client spend and leading to weaker net new business than originally anticipated.
The company now expects its like-for-like revenue, excluding fees paid to suppliers, will fall by between 4.2% to 4.5% in the first half of this financial year.
Mark Read, chief executive officer of WPP – whose departure was announced a month ago – says June was tougher than expected:
'Since the start of the year, we have faced a challenging trading environment with macro pressures intensifying and lower net new business. While we expected the second quarter to be similar to the first quarter, performance in June was worse than anticipated and we expect this pattern of trading in the first half to continue into the second half.
'As a result, we are updating our guidance for the full year and reducing our expectations on LFL revenue less pass-through costs growth to -3% to -5% (from flat to -2%) with a year-on-year decline in headline operating profit margin of 50 to 175 bps (vs. around flat previously).
9.12am CEST
09:12
Shares in copper producer Antofagasta have dropped by over 3% at the start of trading in London.
Other miners are also weakening, with Glencore (-2.2%) and Anglo American (-1.8%) among the FTSE 100 fallers.
8.59am CEST
08:59
Analysts at investment bank Jefferies have warned that the new 50% tariff on copper will drive up costs in the US economy, saying:
'The US does not have nearly enough mine/smelter/refinery capacity to be self-sufficient in copper.
'As a result, import tariffs are likely to lead to continued significant price premiums in the US relative to other regions.'
Tony Sycamore, market analyst at IG, questioned whether the Trump administration can easily make the US self-sufficient in copper:
The aim of the new copper levy is to encourage domestic copper production, which is a challenging objective given the complexities of relocating a copper mine.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says the latest trade news from Trump was not reassuring:
First, hopes of an extension to the current tariff pause—which ends today—were dashed after Donald Trump threatened that the August 1st deadline will be final, with no further extensions.
Second, he slapped a 50% tariff on copper and announced that pharmaceuticals will face 200% tariffs within a year. The news sent COMEX copper futures to a record high, while copper prices on other platforms like India's MCX dropped, on expectations that surplus supply would shift to alternative markets.
8.41am CEST
08:41
Donald Trump is expected to send more letters to countries, informing them of new tariff rates or announcing trade deals, today.
Last night on his Truth Social site, the US president wrote:
We will be releasing a minimum of 7 Countries having to do with trade, tomorrow morning, with an additional number of Countries being released in the afternoon. Thank you for your attention to this matter!
In a separate post, Trump also insisted that his new deadline of 1 August to reach trade deals would not slip, writing:
As per letters sent to various countries yesterday, in addition to letters that will be sent today, tomorrow, and for the next short period of time, TARIFFS WILL START BEING PAID ON AUGUST 1, 2025. There has been no change to this date, and there will be no change. In other words, all money will be due and payable starting AUGUST 1, 2025 - No extensions will be granted. Thank you for your attention to this matter!
Updated
at 8.54am CEST
8.41am CEST
08:41
Copper prices outside the US have fallen, following Trump's threat of a 50% tariff on imports.
On the London Metal Exchange, the metal slid as much as 2.4% at the open, before easing to change hands at $9,653 a ton, 1.4% lower, Bloomberg reports.
8.40am CEST
08:40
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There's turmoil in the copper market after it became the latest frontline in Donald Trump's trade war
The copper price has hit a record high in the US, and fallen in other markets, after Donald Trump announced he would impose a 50% tariff on imported copper.
During a cabinet meeting at the White House, Trump revealed 'Today, we're doing copper,' adding:
'I believe the tariff on copper, we're going to make it 50%.'
Copper is a critical element in electric vehicles, the power grid, military hardware and many consumer goods.
It's known as 'Dr Copper' in the financial markets, because its price is a gauge of the health of the world economy.
Investors' reaction to Trump's annoucement was swift – copper futures traded in the US jumped by over 10% to $5.682 per pound, closing at an all-time high.
That's the biggest jump on records stretching to 1969, the Financial Times reported.
More expensive domestic copper, and a 50% tariff on imports of the metal, will add to inflationary pressures on US businesses and consumers.
Trump also said he would soon introduce levies on semiconductors and pharmaceuticals – two shoes which investors have been waiting to drop for months.
Pharmaceutical imports are also 'going to be tariffed at a very, very high rate', the president said. 'Like 200%.'
'We're going to be announcing pharmaceuticals, chips and various couple of other things – you know, big ones,' he added, of the administration's tariff plans.
10:30am BST: Bank of England publishes its latest Financial Stability Report
11am BST: Bank of England press conference
Noon BST: US weekly mortgaage application data
1.30pm BST: Parliament's business committee quiz Trade minister Douglas Alexander and Cabinet Office minister Pat McFadden on economic security
Updated
at 10.29am CEST