By Marc Morley-Freer, Head of Private Client Business at Smart Currency Exchange
It is believed that George Osborne may start the process of selling off the Government’s stake in Lloyds Banking Group. The stake is worth about £17bn at current market prices, although it is not clear that all the shares would be sold at once.
It is likely that any share sale would be offered to the public at a discounted rate to the price available to institutional investors - and that an additional incentive would be put into place to hold on to the shares for several years. The Mansion House speech in mid-June will likely be the Chancellor’s opportunity to announce any scheme and set the wheels in motion.
Last month I reported on how the UK property market was rebounding and gaining upward momentum, due in part to the Funding for Lending scheme, cheap mortgage deals and a chronic undersupply of affordable housing”.
In addition to the cheaper mortgage deals in the market place, the interest only mortgage market is in resurgence as lenders’ concerns over these types of deals reduce. At the height of 2007, 81 lenders offered interest only products, a year ago 35 and now less than 12.
However, over the next few weeks some ‘non high street lenders’ will enter back into this market place albeit with stricter criteria. A broader range of mortgages can only be a good thing and keep the housing market stimulated.
In Europe, France’s Francois Hollande hailed the Euro crisis as ‘over’ when speaking to Japanese business leaders on a trip to the Far East. Now while I would like to believe him, I have trouble in doing so when most of Europe is suffering from high unemployment, record youth unemployment and recession.
It was only in April that Cyprus was struggling to get agreement from the Eurozone heavyweights on the terms of a bailout. Hollande went on to say that his policies at home will continue to boost jobs and growth - but with France’s jobless at the highest levels for over 15 years, he is not making much progress.
Fundamentally, I still believe that Sterling is undervalued against its Euro trading partner, but in the near term, I expect to see Sterling push down to 1.10 from 1.17 before recovering ground during 2014. This short term pressure is driven by the poor UK growth outlook, giving way to more monetary stimulus rather than any Eurozone strength.
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