Mortgages 'Most Affordable For 14 Years'

By Nick Martin, News Correspondent

Mortgages are more affordable now than at any time in the past 14 years, according to the latest figures.

Monthly payments now account for 27% of a new borrower's income in the second quarter of 2013, well below the average for the past 30 years.

Lower house prices and reduced mortgage interest rates have been the main drivers behind the significant improvement in affordability, according to the Halifax.

Halifax mortgage director Craig McKinlay said: "Substantial mortgage rate reductions and lower house prices have led to a significant improvement in mortgage affordability since the peak of the housing market six years' ago.

"The Funding for Lending Scheme has helped lenders to cut mortgage rates causing a further modest improvement in affordability over the past year despite the modest rise in house prices nationally."

It is good news for first-time buyers.

James Almond from Bramhall near Stockport has just got on to the properly ladder.

The 38-year-old bar manager said he felt the right deals were available to take the plunge.

He said: "I used a mortgage broker to look at the best deals and in the end it was quite affordable.

"Many of my friends aren't so lucky and are still living with their parents because the deposits required are so large."

But there remains a clear north-south divide when it comes to mortgage affordability, according to the Halifax.

Mortgage payments are at their lowest in Northern Ireland where they are just 17% of incomes compared to 36% in Greater London.

Independent mortgage consultant Richard Ignatowicz said the market can change quickly.

 "We can't just say mortgages are now more affordable than ever. It doesn't mean much in isolation.

"Borrowers need to be cautious about changes on the horizon. Will they still be able to afford a mortgage when the rate reverts to 5%? Tthat's the real question."

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Swedes Plot £1bn Swoop For UK Manufacturer

By Mark Kleinman, City Editor

Another slice of Britain's industrial base is poised to fall into European hands with a near-£1bn takeover of Edwards Group, a Sussex-headquartered high-tech manufacturer.

Sky News can reveal that Edwards, which is listed on New York's Nasdaq stock exchange, is in advanced talks about a takeover by Atlas Copco, a major Swedish industrial combine.

A deal for Atlas Copco to buy Edwards could be announced as soon as next week, according to banking sources in the US.

Although it is not quoted in London and specialises in making products such as high-pressure vacuum pumps which are unfamiliar to the general public, the deal will nevertheless be closely-watched in Britain.

Edwards' takeover by Atlas Copco will follow a recently-agreed £3.4bn deal for Schneider Electric of France to buy Invensys, another British manufacturing stalwart.

Edwards employs hundreds of people at its Crawley head office and manufacturing facilities and is widely-held to be among the world's most advanced companies in its field. Its products are an important component in the supply chains of flat-screen television and solar cell manufacturers.

Vince Cable, the Business Secretary, would be alarmed if the deal was predicated upon the closure of any UK facilities but such a move from Atlas Copco was unlikely, said one banker.

Wall Street insiders said the Swedish group, which has a market capitalisation of more than £20bn, planned to offer around $9.20-a-share for Edwards, a healthy premium to the $8 at which it listed on Nasdaq last year.

It is unclear whether Edwards' board has formally voted to approve the bid, but insiders said that investment bankers at Barclays and Lazard, who are advising the British-based company, had recommended that it should do so.

Edwards opted for a listing on Nasdaq over London last year after concluding that it would achieve a higher rating for its shares if it went to the US, and next week's deal will signal the end of its brief tenure on the technology-focused exchange.

A supplier of vacuum pumps to the world's largest semiconductor manufacturers, Edwards was spun out of the BOC gases group after it was acquired by Linde, a German rival, in 2006.

Large chunks of Edwards' shares are still held by CCMP Capital and Unitas, the two private equity firms which acquired it from BOC.

Edwards had a market value of just over $950m (£608m) at Friday's closing share price of $8.45.

The offer from Atlas Copco, which is larger than Electrolux and Volvo, two other big Swedish manufacturers, is expected to crystallise another big financial gain for CCMP and Unitas.

It will also add another dimension to the Stockholm-based company's operations, which include making machines for the mining industry, air compressors and power tools.

Edwards employs more than 3000 people around the world, although it has shifted some jobs from the UK to lower-cost manufacturing sites overseas, including in Asia, recently unveiling plans for a vast factory in China's Shandong Province.

The company is now chaired by Nick Rose, a former finance director of Diageo, the drinks company, who is on the boards of BAE Systems, BT Group and Williams Grand Prix Holdings, the owner of the Formula One team.

Atlas Copco's bid comes six months after Edwards named Jim Gentilcore, who already sat on the company's board, as its chief executive, replacing former Jaguar Land Rover and JCB executive Matthew Taylor.

It was unclear on Saturday whether Mr Gentilcore would remain in place if the takeover of Edwards is completed.

Neither Atlas Copco nor Edwards could be reached for comment.

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City Investors Bank On £55m RBS Branch Payout

By Mark Kleinman, City Editor

A consortium of City investors vying to buy 315 branches from Royal Bank of Scotland is in line to receive £55m in annual interest payments from the state-backed lender - even before they complete a deal.

Under the proposal W&G Investments, a vehicle set up by the former Tesco finance director Andy Higginson, would be paid a 5% "coupon" on a £1.1bn down-payment to acquire the branch network.

The payments would be made by RBS during the period between it agreeing to sell the branches to W&G and the completion of a deal, which analysts expect could take as long as two years.

If it takes longer, RBS could have to pay an even bigger sum to the consortium.

The details are disclosed in a document published on Friday by W&G, which will formally list on London's junior AIM stock market next week.

It marks the latest stage of RBS's protracted efforts to offload the business, codenamed Project Rainbow, under the orders of the European Commission in return for the banks's £45bn taxpayer bailout in 2008.

Santander pulled out of a deal to buy the RBS branches

RBS wants to revive the venerable banking brand-name Williams & Glyn to entice bidders and has granted W&G Investments a licence to use the name during the auction.

The admission documents include, however, dozens of risk factors that could inhibit a takeover of the branches by W&G, which is backed by leading investors such as Lansdowne Partners, Schroders, Talisman and Toscafund.

The potential barriers to a successful acquisition of Rainbow include the greater scrutiny of bank bosses by financial regulators and the drawn-out nature of a deal.

W&G said: "During the period between the Signing Date and the Completion Date, which is anticipated by RBSG to be approximately two years, it is expected that the Company [W&G] will have rights to monitor the performance of the Rainbow Assets.

"However... the Company may not have the ability or right to intervene and the value of the Rainbow Assets may be materially adversely impacted."

It also pointed to the ongoing review of Britain's small business banking market by the Office of Fair Trading, which it said could jeopardise investors' willingness to back a deal.

And it said adverse customer reaction to a takeover could put at risk the bank's desired funding model.

It said: "The currently anticipated funding model for Rainbow is dependent on deposits, rather than wholesale funding.

"There is a risk that there may be adverse public reaction to the Company post acquisition of Rainbow which could lead to depositors withdrawing their money.

"Certain customers and depositors may seek to change banks if they perceive the Separation or the acquisition of Rainbow by the Company might put their money at risk.

"This could result in a funding gap that would need to be addressed by accessing funding in the wholesale markets (provided that such funding were to be available) which is likely to be a more expensive form of funding for the Company than deposit-based funding."

W&G also warns in the documents that the recommendations of the Vickers Commission on banking reform could scupper a deal because of moves to force banks to make themselves safer by ring-fencing retail activities from investment banking operations.

Although the RBS network falls within the permissible limit of £25bn of deposits to avoid having to be treated as a ring-fenced bank, the W&G directors point to uncertainty over the legislation as another risk.

It said: "The draft secondary legislation to the Financial Services (Banking Reform) Bill provides that the requirement to ring-fence will not apply to UK banks holding less than £25,000,000,000 in 'core deposits'. At this stage it is unclear what the finalised threshold will be and therefore whether Rainbow would be a ring-fenced bank."

An earlier deal to sell the network, which comprises all RBS-branded branches in England and NatWest branches in Scotland, fell through last year when Santander UK pulled out citing concerns about IT systems.

Santander had initially agreed to pay £1.65bn for the branches, which include £19bn of assets, 250,000 small business customers and approximately 5,000 staff.

The rival bidders remaining in the RBS auction include a private equity bid from Corsair Capital and Centerbridge that is backed by the Church of England's pension fund, and one led by Blackstone, the US private equity group.

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Mortgages 'Most Affordable For 14 Years'

By Nick Martin, News Correspondent

Mortgages are more affordable now than at any time in the past 14 years, according to the latest figures.

Monthly payments now account for 27% of a new borrower's income in the second quarter of 2013, well below the average for the past 30 years.

Lower house prices and reduced mortgage interest rates have been the main drivers behind the significant improvement in affordability, according to the Halifax.

Halifax mortgage director Craig McKinlay said: "Substantial mortgage rate reductions and lower house prices have led to a significant improvement in mortgage affordability since the peak of the housing market six years' ago.

"The Funding for Lending Scheme has helped lenders to cut mortgage rates causing a further modest improvement in affordability over the past year despite the modest rise in house prices nationally."

It is good news for first-time buyers.

James Almond from Bramhall near Stockport has just got on to the properly ladder.

The 38-year-old bar manager said he felt the right deals were available to take the plunge.

He said: "I used a mortgage broker to look at the best deals and in the end it was quite affordable.

"Many of my friends aren't so lucky and are still living with their parents because the deposits required are so large."

But there remains a clear north-south divide when it comes to mortgage affordability, according to the Halifax.

Mortgage payments are at their lowest in Northern Ireland where they are just 17% of incomes compared to 36% in Greater London.

Independent mortgage consultant Richard Ignatowicz said the market can change quickly.

 "We can't just say mortgages are now more affordable than ever. It doesn't mean much in isolation.

"Borrowers need to be cautious about changes on the horizon. Will they still be able to afford a mortgage when the rate reverts to 5%? Tthat's the real question."

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Summer Sun Fuels UK Spending Spree

Retail sales rose at their fastest annual pace for over two years in July as the UK basked in summer sunshine.

The Office for National Statistics (ONS) said the heatwave boosted sales of barbeque food and outdoor items in particular as people enjoyed the spell of warm weather nationwide.

Retail sales volumes jumped 1.1% on the month - almost twice as fast as expected - to give an annual rise of 3%, the highest since January 2011.

Feedback from supermarkets suggested the sunshine also sparked demand for food, alcohol and summer clothing, the ONS said.

A separate report by the British Retail Consortium had already found that the 'feelgood factor' of the weather was also strengthened by the arrival of the Royal baby and sporting success - namely wins for the British and Irish Lions in Australia, Andy Murray at Wimbledon and Chris Froome in the Tour de France.

The BRC pointed to the best July since 2006 for its members - mostly larger stores - with sales values up 3.9% on the year.

The performance - potentially boosted by families choosing to remain in the UK over the holiday season - gives some scope to the possibility that economic growth is improving faster than expected.

The retail sector accounts for 6% of the UK's economy but some economists question whether the level of spending can be maintained given the continuing squeeze on household incomes from wage growth failing to keep pace with rising prices.

New Bank of England governor Mark Carney has sought to reassure consumers, markets and businesses, that the base rate of interest will not be raised until the unemployment rate drops to 7%.

The bank does not expect that to happen for three years - giving potential encouragement to people to spend what spare cash they have because savings rates are so poor.

While a third consecutive month of rising retail sales is the latest sign that Britain's recovery is gathering pace, there has also been robust data from the wider services sector as well as upbeat figures from manufacturing and construction.

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Facebook Tests Tool To Make Mobile Payments

Facebook plans to test a new service aimed at making it easier for users to make purchases on their mobile devices.

The social networking site is exploring ways to allow people to make purchases with just their Facebook login on partnering e-commerce mobile apps.

The service would use payment information that shoppers store on Facebook to automatically complete checkout forms of certain apps.

The app would then handle the payment processing, not Facebook.

Facebook confirmed in a statement that it was working on a "very small test" designed to "make it easier and faster for people to make a purchase in a mobile app by simply pre-populating your payment information".

But the company said there was no timetable for making the service available to its customers.

If rolled out, the new payment system would pit Facebook in direct competition with PayPal, as well as e-commerce firms like Braintree.

News of the test hit PayPay's shares

Spokeswoman Tera Randall said in a statement that Facebook has a "great relationship with PayPal, and this product is simply to test how we can help our app partners provide a more simple commerce experience".

The test, she added, would not involve moving payment processing "away from an app's current payments provider, such as PayPal".

Nonetheless, shares of PayPal's owner, eBay Inc fell on news of the potential competition. The stock closed down $1.05, or 1.9%, at $53.18.

Facebook's stock closed down nine cents at $36.56.

Forrester Research analyst Denee Carrington believes Facebook will face an uphill challenge in offering mobile payments even though the company has been building up its database of users' credit cards.

"Consumers want safe, seamless and convenient mobile payments and there are a growing number of competitors that consumers trust more - such as PayPal, Visa (V.me) and others," he said.

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Eurozone Out Of Recession As Economy Grows

The eurozone has moved out of recession as its economy grew by 0.3% in the second quarter.

It means the struggling area has finally emerged from its longest recession to date.

The eurozone saw slightly faster then expected growth, with its two largest economies leading the way.

Germany, Europe's biggest economy, expanded by 0.7% in the period from April to June, after GDP stagnated in the first quarter.

France saw its strongest quarterly growth in two years as its economy increased by 0.5%, while Portugal boasted a rapid rise of 1.1%.

The official figures confirmed expectations that a fragile recovery is underway, however some countries saw contraction.

In Spain GDP fell by 0.1%, while Italy and the Netherlands both dropped by 0.2%.

The data from Eurostat, the European Union's statistics office, showed that collectively the 17 EU countries saw the first quarterly growth since the eurozone slipped into recession in the final quarter of 2011.

Lasting six quarters, it was the longest recession to hit the eurozone following the launch of the single currency in 1999.

The quarterly improvement was slightly better than the 0.2% market expectations.

But despite the expansion, the eurozone economy remains 0.7% smaller than it was in the same period last year.

Following the news EU Economic Affairs Commissioner Olli Rehn said: "A sustained recovery is now within reach but only if we persevere on all fronts of our crisis response."

The area now faces a recovery tainted by record high unemployment and severe austerity measures in countries such as Greece.

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JP Morgan: Charges Over $6bn 'London Whale'

Officials in the United States have charged two ex-JP Morgan traders over the so-called 'London Whale' scandal that resulted in losses of $6.2bn (£4bn).

Prosecutors in Manhattan accused former London-based traders Julien Grout, 35, and Javier Martin-Artajo, 49, of wire fraud and a conspiracy to falsify books and Securities and Exchange Commission (SEC) records, according to court papers.

The charges are the result of an investigation into events surrounding the losses in the London division of JP Morgan's chief investment office.

"This was not a 'tempest in a teapot', but rather a perfect storm of individual misconduct and inadequate internal controls," prosecutor Preet Bharara said at a news conference on Wednesday.

The case, filed in federal court, claims Grout and Martin-Artajo deliberately tried to hide hundreds of millions of dollars in losses on trades in a portfolio of synthetic credit derivatives.

The charges focus on investments whose components were supposed to be marked at their market value each day as best as the bankers could approximate.

The mounting loss eventually topped $6bn and was attributed to trader Bruno Iksil, who was dubbed the 'London Whale' for his location and the super-sized bets he made.

Prosecutors confirmed that they had agreed not to prosecute Mr Iksil but the deal requires him to cooperate fully with officials.

The charges say that from March to May 2012, following Martin-Artajo's direction, Grout began using prices for the portfolio "deliberately chosen to minimise losses rather than represent fair value," the SEC said.

Lawyers for both men have previously stated that their clients did nothing wrong.

A JP Morgan spokesman declined to comment on the case.

It is understood that Spanish national Martin-Artajo supervised JP Morgan's trading strategy in London while his French colleague recorded the value of any bad investments.

Mr Bharara said his office had contacted the two men's lawyers.

"We are hopeful they will do the right thing and present themselves in the United States," he said.

The prosecutor added that it was a "rare" non-prosecution deal for Mr Iksil, who is no longer a trader.

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Cold Winter Boosts E.On Profits By 15%

Profits at energy firm E.on surged by almost 15% in the first half of the year, boosted by the cold start to 2013.

The company, one of the so-called "big six" UK energy suppliers, said it made £273m in the first six months of 2013.

This is an increase of 14.7% on the same period in 2012.

E.On insisted its profit margin was on a similar level to the previous year despite a rise to 6.25% from 5.97%.

It was the last of the major players in the market to hike its bills - by an average 8.7% - having pledged to keep its pricing on hold during 2012.

UK boss Tony Cocker insists E.On's bills are fair

The industry has blamed price increases largely on soaring wholesale prices and none of the top six firms has been able to rule out further rises to bills ahead of the coming winter.

E.On, which has around five million customers in the UK, has insisted it does not make excessive profits.

While its UK business saw profits grow 15%, the E.On group suffered a 15% fall in earnings for the half year.

UK chief executive Tony Cocker said: "We are continuing to work hard for our customers, make improvements to service and operate a sustainable business that delivers a fair profit.

"The colder start to the year meant more energy has been used, so sales are up; the costs we control have come down at a time when those we don't control are continuing to rise; meaning that ultimately whilst our profit has increased slightly our overall supply profit margin is very much in line with last year.

"Our absolute focus remains on simplifying our products, improving our customer service and, quite simply, making sure we do the right thing."

He concluded: "The proof of all the changes we've made is evident in improving customer feedback."

The energy regulator Ofgem recently revealed that the "big six", which also include British Gas, nPower, SSE, EDF and Scottish Power, collectively made more than £3bn in profits over the last three years on the back of a £300 annual rise in bills.

Last month, nPower estimated that bills would increase by a further £240 by 2020 - £100 more than the Government's estimates.

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US Airways-American Airlines Merger Challenged

The US Justice Department and a number of state attorneys general have challenged the proposed $11bn (£7bn) merger between US Airways and American Airlines.

The Justice Department says the merger would result in the creation of the world's largest airline and reduce competition for commercial air travel in local markets.

A lawsuit filed in the federal court in Washington seeks to prevent the companies from making the deal in order to preserve head-to-head competition.

In a joint statement, the airlines said they would "mount a vigorous defence" of the planned merger, adding that blocking the deal would "deny customers access to a broader airline network that gives them more choices".

"We believe that the DOJ is wrong in its assessment of our merger," the statement read.

American Airlines filed for bankruptcy protection in 2011

"Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together."

"We will mount a vigorous defence and pursue all legal options in order to achieve this merger and deliver the benefits of the new American to our customers and communities as soon as possible."

Shares of both companies plunged on Tuesday, and other airline shares fell sharply as well.

In February, the two airlines disclosed their plans to create a company with 6,700 daily flights and annual revenue of roughly $40bn (£26bn).

But Attorney General Eric Holder said the transaction between US Airways and American would result in "higher airfares, higher fees and fewer choices".

Were the deal to be approved, the four biggest US airlines - American, United, Delta and Southwest - would all be the products of mergers that began in 2008.

Last year, business and leisure airline travellers spent more than $70bn (£45bn) on airfare for travel throughout the United States.

American parent AMR Corp has cut costs and debt since it filed for bankruptcy protection in late 2011.

Pilots from both airlines have agreed on steps that should make it easier to combine their groups under a single labour contract, a big hurdle in many airline mergers.

The attorneys general were from Arizona, Florida, the District of Columbia, Pennsylvania, Tennessee, Texas and Virginia.

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