The Chancellor has today set out the next stage in the government’s plan to return Lloyds Banking Group to private ownership by extending the Lloyds trading plan for a further six months.
The announcement follows confirmation this morning that the government has sold a further 1% of Lloyds shares through the trading plan.
The latest sales mean that the government has recovered almost £3.5 billion for the taxpayer from the trading plan, bringing the total recovered from Lloyds to over £10.5 billion, and the government’s stake to below 19%.
The trading plan, launched in December 2014, was due to end no later than the 30 June 2015. The extension announced today means that the plan will now end no later than 31 December 2015.
Shares have been sold through the trading plan for an average price of over 80p, above the average 73.6p originally paid for the shares.
Further sales will contribute towards the government’s target to sell at least a further £9 billion of Lloyds shares in 2015-2016.
Chancellor George Osborne said:
“The trading plan has been a huge success, with almost £3.5 billion raised for the taxpayer so far. This means we have now recovered over £10.5 billion in total, more than half of the taxpayers money put into Lloyds, and we now own under 19% of the bank.
“But we’re determined to get on with the job of returning Lloyds to private ownership. That’s why I’m extending the plan for six months so that we can make even more progress in returning money to the taxpayer and paying down the national debt.”
Mark Taylor, Dean of Warwick Business School and former economist at the Bank of England, said:
“This is good news for UK taxpayers and stands in stark contrast to the fortunes of the Royal Bank of Scotland.
“Taxpayers took a 40 per cent stake in Lloyds at the height of the banking crisis, pumping £20bn into it in order to avoid its collapse, which would have had serious consequences for the financial sector.
“Around half of that money has now been repaid and the Government’s holding has also been cut in half, to about 20 per cent, so at this rate taxpayers are on course to get all of their money back. In fact, with Lloyds offering such an improved financial performance, there is a likelihood of a stronger share price going forward so that there may even be a profit for the taxpayer on the sale of the remaining 20% Government stake.
“RBS, meanwhile, is still 80 per cent Government-owned and is reporting losses. This reflects both the scale of the difficulties that RBS had got into as well as the strong management and leadership at Lloyds over the past few years.”
Tracker rates see increased popularity
Research by Paragon Mortgages has revealed that the decline in tracker rate popularity seems to be shifting.
Intermediaries have reported a decline in popularity of tracker rate products since mid-2012, with survey results showing a continuous fall from Q3 2012 to Q2 2014. However, tracker products accounted for 18% of cases in Q1 2015 (15% of cases in Q4 2014).
Despite the modest improvement in the sale of tracker products, fixed rates continue to be the most popular with intermediaries recommending a fixed rate product in four out of every five sales.
The research also revealed that intermediaries are writing more mortgage business with longer-term initial rates.
The results from the specialist lender’s quarterly intermediary tracking survey for Q1, showed 30% of cases were for terms of five years or more, an increase of 26% on the previous quarter. At the same time, there was a reduction in two and three year terms, dropping from 71% to 66%.
Generally, intermediaries are also feeling more positive about future levels of mortgage business, with those surveyed expecting a 6% increase in case volumes in the second quarter.
Is 180,000 new homes a year achievable?
A new report from Knight Frank on housebuilding has found that delivering more than 180,000 new homes a year is unachievable under current market conditions, according to the opinion of over two thirds of UK housebuilders.
The report revealed that 67% of respondents said the maximum sustainable annual delivery of new homes was 180,000 or less. Just 9% said it was possible to build more than 200,000 residential units a year.
More than half of all developers and housebuilders said a rise in the delivery of affordable homes over the next year was unlikely. However, around 60% expect a continued rise in the number of total housing starts and completions over the next 12 months.
The report also found that nearly four in five respondents (78%) expect new-build prices to rise over the next 12 months, with 43% expecting rises of up to 5%. 91% of respondents expect a rise in construction costs amidst the continued pressure on housebuilders. The majority (59%) predicted an increase of a further 5 to 10% this year.
Greenfield land prices will rise, according to two-thirds (68%) of respondents.
More than half of respondents (56%) say the Community Infrastructure Levy (CIL) is weighing on development volumes.