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Mortgage rates set to fall further but house prices remain high

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Mortgage rates set to fall further but house prices remain high

The UK’s housing market remains ‘stagnant’ because house prices are still unaffordable even as mortgage rates come down, experts have told i.

In recent weeks, mortgage rates have fallen for buyers with large deposits or lots of equity. This means they can access deals below 4 per cent with some two-year fixed-deals now as low as 3.76 per cent.

However, first-time buyers or home movers without lots of cash who cannot put down more than 10 per cent of their home’s value as a deposit are still looking at rates above 4.5 per cent.

As a result, the number of homes being bought and sold remains low, with activity in the market still below levels seen in 2021 and 2022.

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Expert housing market analyst Neal Hudson and founder of Built Place – a housing market research platform – told i that the UK’s housing market was still “fragile”.

“Mortgage rates may have come down from their mini-Budget peak but they’re still a lot higher than they have been for over a decade,” Mr Hudson said. “And house prices in most places are still high and affordability is incredibly stressed.”

Data released by the Office for National Statistics showed that across the UK, house prices increased by an estimated 2.2 per cent in the 12 months to July to reach £290,000 on average.

These rises were mainly driven by Scotland, where house prices went up by six per cent. Average house prices in England grew by 1.6 per cent, and in Wales the figure was two per cent – both lower than the current rate of inflation.

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First-time buyers, particularly, are struggling to afford high house prices and higher borrowing rates. Meanwhile, less well-off home movers, who have bought at the top of the market since the late 2010s are struggling because their homes have not skyrocketed in value and given them equity to play with.

Richard Donnell, executive director of the property website Zoopla, said buyers with smaller deposits face are facing difficulties.

“It looks as though house price inflation will come in at around two per cent this year which is below earnings growth at four per cent,” he said.

House price inflation at two per cent would also mean that the value of homes in some parts of the country was only just getting back to their all-time high of 2022.

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The Bank of England held interest rates this week, but experts have said this should not stop some mortgage rate cuts. The expectation remains that the base rate will come down from five per cent later this year.

However, even if it does experts say that the UK’s housing market will likely remain in a state of stalemate with house prices unlikely to rise or fall dramatically in the near future.

Generally, mortgage prices and house prices have an inverse relationship. Lower mortgage costs mean people can afford to pay more for homes as they can take on bigger amounts of debt. This fuels house price rises.

But because real house prices – adjusted for inflation – did not fall as drastically as predicted when interest rates were higher around the time of former prime minister Liz Truss’s disastrous “mini-Budget”, the fact that the brakes are still on the housing market doesn’t mean buying a home is more affordable.

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House prices across the UK remain at near-historic highs.

This, combined with mortgage rates that are still nearly double what they were before the pandemic, means that banks are not lending mortgages in huge numbers.

One mortgage market insider said: “Lending is still risk averse. Mortgages are for wealthier households with access to equity or big deposits at the moment, particularly in the south of England.”

While the number of homes sold in July (also known as transactions) was up by seven per cent on 2023 according to data from HMRC, activity in the housing market remains lower than it was in 2021 or 2022.

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“Transactions are still happening but it’s a tricky process whether you’re looking to buy or sell,” Mr Hudson said.

Higher mortgage rates have limited how much buyers and movers can borrow. “People are having to stretch themselves, buy somewhere smaller or move to a lower value area.”

At the same time, stagnant house prices means people who need to sell are “less willing to move”, Mr Hudson added.

“If mortgage rates come down sharply because lenders are being more tolerant of borrowers stretching themselves and that continues into a period of lower mortgage rates, then we could see house prices rising faster than incomes again,” he warned.

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This was the situation for much of the 2010s.

Such a scenario would further “stretch affordability” for first-time buyers and movers who don’t have huge amounts of equity, Mr Hudson said.

Lucian Cook, director of residential research at Savills, said that though the fall in mortgage rates was an “important pre-cursor” to the housing market “picking up”, current rates, combined with uncertainty ahead of October’s Budget, mean that house prices are more likely to rise “gradually” than “suddenly”.

Both Mr Donnell and Mr Cook flagged that lenders’ stress tests would likely hold back large price increases by limiting the number of people who can afford to borrow big.

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“Mortgage regulations have stopped boom and bust,” Mr Donnell said. “But the flip side is that they are the reason that more and more people are priced out of the market because house prices remain so far above incomes, particularly in the south of England.”

Stress tests are designed to make sure that mortgage borrowers would still be able to afford their payments if rates rose, as they did after the Coronavirus pandemic and during the ‘mini-budget’ crisis.

In 2022, the Bank of England scrapped the mortgage market affordability test which had forced banks to be sure that mortgage borrowers could afford repayments at three percentage points above their standard reversion rate before they could be approved for a home loan.

This had been in place since 2015 and was implemented after the 2008 global financial crisis.

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However, i understands that most lenders are still using a figure of around eight per cent.

Mr Hudson said that what happens next to house prices in the UK depends on what happens to mortgage rates.

If homebuyers with smaller deposits can access rates of below four per cent again it would “increase the likelihood” of house price rises – but would not improve affordability.

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López Obrador’s son takes senior party post as Mexico president bows out

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Mexico’s ruling party chose the son of President Andrés Manuel López Obrador for a senior role on Sunday, in a sign the leftist leader will continue to influence public life after he steps down.

López Obrador is in his final weeks of a six-year term that has polarised Mexican politics and concentrated legislative power in his party. His handpicked successor, former Mexico City Mayor Claudia Sheinbaum, will replace him as president in October.

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In a conference centre in the capital on Sunday, Sheinbaum and party delegates emphasised “unity” as the younger generation of leadership was chosen.

Andrés López Beltrán, the president’s second-eldest son, has for years worked closely for his father behind the scenes and from next month the 38-year-old will take up the administrative position of organisational secretary for the Morena party.

“We all know that he [Obrador] will remain present in this party with his example, with his legacy. Our job running this secretariat will be to keep that legacy, that line,” López Beltrán said of his father to a cheering audience.

López Beltrán, who keeps a low public profile and has not given speeches or interviews, has alongside his brothers been the subject of numerous investigations linking them or close friends to alleged corruption in public contracts. The president and his sons have strenuously denied any allegations of wrongdoing.

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The choice of López Beltrán, known as Andy, is seen as a way for the president to have greater influence over his successor and position his son for a future run at the presidency.

“It screams ‘I want to stay in power for the next 12 years’,” said Joy Langston, a professor at the Centre for International Studies at the Colegio de México. “It speaks of this powerful dark cloud that is hanging over Sheinbaum in the near future.”

President Andrés Manuel López Obrador and president-elect Claudia Sheinbaum at a memorial on Thursday © CLAUDIA SHEINBAUM’S PRESS OFFICE/AFP via Getty Images

Founded as a civil society group to help López Obrador’s 2012 presidential campaign, Morena now controls the presidency, a working supermajority in both houses of congress and two-thirds of governorships.

Morena’s members refer to the party as a “movement” but few dare to publicly disagree with the president, who has 60 per cent approval ratings and a devoted base among lower-income voters.

Through the transition Sheinbaum stuck close to her mentor, physically in his farewell tour across the country, and rhetorically in her statements.

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Some of Sheinbaum’s supporters paint her as a more moderate, technocratic leader than the president, with debate in the media over whether she secretly disagrees with some of his policies.

But the presence of López Obrador’s son, the possibility of recall referendums, and the placing of loyalists in influential positions will make it hard for her to stray too far from the path he has set, analysts said.

The choice of López Beltrán for a role managing party structures cements the perception that Morena is based around the president himself. In office López Obrador raised the minimum wage and social programmes, while at the same time empowering the military and slashing the capacity of the state bureaucracy.

Some members of Morena have already suggested that López Beltrán could be the party’s candidate for the 2030 election, complicating Sheinbaum’s efforts to control her own legacy.

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Others say his presence, if she keeps him on side, could be an asset amid potentially fierce jostling for control within the party. Leading Morena officials have made clear that keeping the ruling coalition together will be its biggest task.

“Our challenge is unity,” said senate president Gerardo Fernández Noroña. “People are already talking about 2030, so we have to be careful on that to not be divided.”

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Disabled UUP politician ‘frustrated’ over airport lift

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Disabled UUP politician 'frustrated' over airport lift

A Northern Ireland politician, who is a wheelchair user, was left frustrated after his plane took off without him, because there was no lift ready to assist him onto the aircraft in Birmingham Airport.

Andy Allen, an Ulster Unionist Party MLA, told BBC News NI he was due to get on an Aer Lingus flight to Belfast City on Sunday but could not board.

Mr Allen, a former soldier, was 19 when he was injured by a bomb while on patrol in Afghanistan in 2008.

Mr Allen said that he sat on the tarmac ready to depart, and was later informed that there was a request for his luggage to be taken off the plane and that the plane was leaving without him.

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He was then brought back into the terminal.

The airport provided a hotel for the night and he has been put on a flight on Monday.

The airport apologised for the inconvenience and said the issue was due to “technical issues” and the matter would be fully investigated.

However Mr Allen said that accessibility for disabled customers must be improved.

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Mr Allen explained that the issue was not that he missed his flight but that he did so because he was a wheelchair user.

“In society as a whole there are things that need to be improved for disabled people, to ensure disabled people can play a full part I society and we aren’t prevented from being able to do so,” he told BBC News NI.

“It’s devastating,” he said.

“How many other people have experienced it that haven’t felt they’ve been able to speak, that’s why I felt it was important to call it out,” he added.

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He said there was an issue with special assistance at the airport.

“I’m not asking for special treatment, just a level playing field,” he added.

Former UUP leader Dough Beattie said it was “appalling”.

A Birmingham Airport spokesperson said that the airport works “closely with our assisted travel provider, Mitie, to deliver the highest possible customer service to all our passengers.”

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“Unfortunately, on this occasion due to technical issues, Mr Allen experienced a delay. We will fully investigate this matter. Mr Allen has been rebooked on a flight for tomorrow and a hotel is being arranged for him and his travel companion for this evening.

“We apologise to Mr Allen for any inconvenience.”

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Peter Island Resort Opens November 2024, Transformed And Reimagined

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(credit: Peter Island Resort)

A treasured secret among sophisticated travelers for decades, Peter Island Resort in the British Virgin Islands re-opens in November 2024 after a six-year hiatus. The property closed during the Virgin Islands’ 2017 hurricane season and now offers brand new and upgraded accommodations as well as other state-of-the-art facilities. Rebuilt and re-envisioned, the island boasts a new level of luxury while maintaining and preserving its relaxed, casual elegance, personalized service, five stellar beaches and hundreds of acres of unspoiled tropical island. 

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Situated on the largest private island in the British Virgin Islands, the 52-room resort is a tranquil seaside oasis featuring an oceanfront spa that takes pampering to the next level. With the exception of two villas, all accommodations are located on the beachfront just steps from the sea, including eight beachfront rooms with private outdoor hot tubs and two two-bedroom villas. 

(credit: Peter Island Resort)

The 21,000 sq. ft. Falcon’s Nest Villa is a site to be seen. This six-bedroom three-story villa offers their most discerning guests sweeping 360 degree island and ocean views, an infinity pool with hot tub, as well as two outdoor showers. Guests who stay in Falcon’s Nest or the Hawk’s Nest Villa overlooking the Yacht Club, also are afforded villa staff and the option of a private chef. 

Peter Island comprises hundreds of acres of lush, tropical island terrain including five pristine beaches and the scenic five mile loop with draw-dropping views of the surrounding Virgin Islands. Whether alongside the new infinity pool overlooking the sea, or the beachside cabanas’ butlers service, the areas offer guests an array of pool and beach-based activities along with a selection of small bites and creative cocktails. Guests will undoubtedly stop at Drunken Pelican for a round of sunset Painkiller cocktails before indulging their taste buds at Drake Steakhouse for a vibrant atmosphere. 

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(credit: Peter Island Resort)

Along with a new 3,200 sq. ft. conference center, the revamped 10,000 sq. ft. spa carries products by 111Skin and features seven treatment rooms, two relaxation lounges, a fitness center, a saltwater pool and a beauty salon. Offering moments of renewed decadence, guests can choose from a variety of services including the Spa’s signature treatments which use local ingredients. The resort can also plan private dinners on the beach as well as off-island excursions, such as scuba diving, sail and snorkeling excursions, helicopter tours, sailing charters and deep-sea fishing to immerse guests in the picture-perfect surroundings.

A must on every sailing itinerary, the newly christened Peter Island Yacht Club offers a full-service marina with dockage that accommodates superyachts of up to 200 feet. Complete with its own commissary, boutique and the Drunken Pelican bar & grill, the marina makes use of more than 250 feet of new dock space to accommodate vessels of all types and sizes.

(credit: Peter Island Resort)

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With its unspoiled natural wonders and abundance of land and sea activities including diving, snorkeling, sailing, windsurfing, deep sea fishing, pickleball, hikes up the island’s scenic Sunset Loop and more, Peter Island continues to enchant guests in its private island paradise. Guests can arrive via helicopter service from St. Thomas (STT), private charter boat from one of St. Thomas’ docks, or a 20-minute taxi ride from Tortola’s Beef Island Airport (EIS) to the Peter Island Ferry Launch, followed by a 30-minute private yacht transfer to Peter Island Resort. Rates starting at $1,000 a night.

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Teenage boy stabbed to death in Woolwich as suspect remains at large

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Teenage boy stabbed to death in Woolwich as suspect remains at large

A TEENAGE boy has been stabbed to death – with his killer still at large, police have confirmed.

Cops were called at just after 6.35pm on Sunday to reports of a disturbance in Woolwich, southeast London.

A police cordon remains in place at the scene

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A police cordon remains in place at the sceneCredit: Getty

Officers found a teenage boy with a stab injury on Eglinton Road and he died at the scene soon after, a Met spokesperson told the Sun.

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His next of kin has been informed and a crime scene remains in place.

No arrests have been made at this stage, with an investigation ongoing.

The spokesperson said: “Police were called approximately 18:35hrs on Sunday, 22 September to reports of a disturbance on Eglinton Road, SE18.

“Officers attended and found a teenage boy with a stab injury. Despite the efforts of officers and paramedics at the scene, he sadly died a short time later.

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“His next of kin have been informed

“A crime scene remains in place.

“There have been no arrests and enquiries continue.

“Anyone with information is asked to call police via 101 quoting reference CAD 5989/22Sep.”

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Have you been affected by this incident? Email ryan.merrifield@thesun.co.uk


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Leftist outsider Dissanayake wins Sri Lanka election

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This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to receive the newsletter every weekday. Explore all of our newsletters here

Good morning. In today’s news:

But first, Anura Kumara Dissanayake, a neo-Marxist outsider candidate, has won the Sri Lankan presidency.

The 55-year-old leftist beat incumbent President Ranil Wickremesinghe, who took power in 2022 after the country defaulted on its foreign debt and its leader Gotabaya Rajapaksa fled, and the main opposition leader Sajith Premadasa, son of a former president.

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Dissanayake’s victory is the nation’s biggest political upset since independence from Britain and throws fresh doubt on its fragile IMF-backed debt restructuring. In a statement on social media, Dissanayake, widely known by his initials AKD, promised “a fresh start”.

He has pledged to continue with Sri Lanka’s $3bn IMF loan agreement, but alter some rigid conditions to grant more relief to the country’s 23mn people, about a quarter of whom are in poverty after two years of crisis and austerity. 

In his campaign, Dissanayake vowed to end corruption and rid public life of scandal, while slashing the privileges of the ruling class such as generous pensions and car permits.

Analysts said the outcome was a stunning result for a bloc with just three MPs in a parliament dominated by parties supported by legacy elites. Here’s what to know about Sri Lanka’s next president.

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And here’s what else I’m keeping tabs on today:

  • Economic data: Singapore and Malaysia publish consumer price inflation data for August. Labour market data is due from Taiwan.

  • Japan: Financial markets are closed for Autumn Equinox Day.

What lies ahead for India after the first 100 days of Prime Minister Narendra Modi’s third term? Join FT, Nikkei Asia and Asia Society experts for a webinar on October 10 and put your questions to our panel now. Register for free. 

Five more top stories

1. Chinese electric-car maker BYD’s expected expansion into Pakistan has raised hopes in the country that the company can help jump-start exports in the automotive manufacturing sector. For BYD, a planned EV assembly plant in Pakistan would mark the company’s first venture into south Asia after being blocked in India by Prime Minister Narendra Modi’s government.

2. European steelmakers have pleaded with trade officials to tackle a surge in Chinese steel exports that has driven European prices below the cost of production. A new, comprehensive system of tariffs is needed to address the market-distorting effects of global overcapacity, producers and Europe’s main trade body told the FT.

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3. The US warned Israel against opening a full-blown war with Hizbollah yesterday as the Lebanese militant group and Israeli forces engaged in some of their fiercest exchanges of fire since October 7. Here’s the latest.

4. Germany’s Social Democrats were on course for a narrow victory over the far-right Alternative for Germany in elections in the eastern state of Brandenburg. The projected result is an unexpected reprieve for Olaf Scholz as he prepares to run for a second term as chancellor next year.

5. US banks made a $1tn windfall from the Federal Reserve’s two-and-a-half-year era of high interest rates, an analysis of official data by the FT has found. Lenders got higher yields for their deposits at the Fed but kept rates lower for many savers, the review of Federal Deposit Insurance Corporation data showed. The boost to the US’s more than 4,000 banks has helped pad out profit margins.

The Weekend Essay

Masayoshi Son
SoftBank founder Masayoshi Son © Ryan Pfluger/AUGUST

SoftBank founder Masayoshi Son has won and lost fortunes with his bets on technology. So is the investor a visionary — or a gambler who got lucky? Lionel Barber’s Weekend Essay untangles the mystery of the world’s greatest disrupter.

We’re also reading . . . 

  • Business lunches: Lack of time, elbow room and alcohol have created a problem in the world’s business capitals.

  • AI-powered assistants: Known as co-pilots, they have become the software industry’s latest attempt to sell generative AI to business customers.

  • What our Tupperware is telling us: The celebrated brand may be in danger, but demand for storage solutions has never waned, writes Harriet Fitch Little.

Chart of the day

HSBC’s exposure to defaulted commercial property loans in Hong Kong surged almost sixfold to more than $3bn in the first half of this year, underscoring the risks the UK bank faces from a slump in the Chinese territory’s real estate market.

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Line chart of Rents under pressure amid high vacancy showing Hong Kong office rents are in decline and could further drop

Take a break from the news

The success of India’s cricket premier league has spawned a flurry of new fast-paced competitions around the world designed to draw in untapped audiences. But can they all survive?

Additional contributions from Gordon Smith

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John Barrowman’s stroppy exit from Celebrity SAS does him no favours

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John Barrowman's stroppy exit from Celebrity SAS does him no favours

Celebrity SAS: Who Dares Wins has returned with 15 new “stars” (ie people you might have seen on the TV once) ready to prove their mettle on the brutal endurance course. Though the opening episode felt more like a test of how many scenes of vomiting I could get through.

This year’s line-up included England’s former rugby captain Chris Robshaw, journalist and sister to the former Prime Minister Rachel Johnson, and Paul Gascoigne’s daughter Bianca. There’s always at least one questionable face on Celebrity SAS (in 2023 it was former health secretary Matt Hancock) and this year it was John Barrowman, who – in his words – “was made to look like a sexual deviant” when he was accused of putting his penis on his co-stars’ shoulders (which he has always denied).

Not that he spent much time on screen. He quit 32 minutes after arriving at base camp, declaring it “wasn’t for him” and storming off in what can only be described as a toys-out-of-the-pram strop. It was a shocking move.

Barrowman was obviously bitter that the accusations made by multiple co-stars came to light, though his impressive lack of self-awareness left him unwilling to take any accountability. While he acknowledged he would “shake and waggle it about” during nude scenes, he also blamed the press for “making the allegation” and killing off his career by writing about it.

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Pictured: Bobby Norris/trainasium
Bobby Norris struggled to get on to the beams (Photo: Pete Dadds/Channel 4)

At least he attempted the first challenge – to traverse two parallel bars over a canyon river, with a 330ft drop below. Only Olympic gymnast Ellie Downie succeeded (as she should have, since balancing is her job). Towie’s Bobby Norris couldn’t even bring himself to get on the bars in the first place.

I began to worry how some of them even passed their psych evaluation before being let on the show. Tears, panic and gut-spewing – particularly from Norris – had set in before they even got out of the cars. Even an introduction to the newest staff member, SAS psychologist Dr Alia, who says she cleared them all herself prior to filming, did little to soothe the uncomfortable viewing.

Norris spent so much time in tears or with his head in a bag, you have to wonder why he even bothered signing up. I’m going to assume a pretty hefty pay packet.

Rachel Johnson and reality star Pete Wicks (currently gracing the Strictly dance floor) came across the best, both of them entering the series with a point to prove.

Pictured: Billy/Rudy/Foxy/Recruits
There was for too much vomit in this opening episode (Photo: Pete Dadds/Channel 4)

Johnson’s formative years rough-housing with the men around her (her father, Stanley, made her go to an all-boys school) paid off in the Who Dares Wins environment. She seems to be on a mission to prove that tough love is the correct route and, to her credit, she performed well. Though I could have done without her strange attempt at showboating, bragging that being screamed at by the staff is better than living in “woke, lefty London”.

Wicks, who literally crashed out of last year’s series after breaking his ribs in a freefall into the ocean, returned with a more humble attitude. Acknowledging he “played Billy Big B*****ks” a little too much last time, he had a resolve to make it as far as possible. I found myself rooting for him the most.

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As the pressure mounts, some will crack and quit (my money’s on Norris) while others will rise up the ranks. I’m feeling optimistic about feisty Bianca Gascoigne, even if she did only get three minutes on screen.

It remains to be seen if it will be a series to remember, but this year’s Celebrity SAS has got off to a promising start. Hopefully the puking won’t happen again.

‘Celebrity SAS: Who Dares Wins’ continues on Monday at 9pm on Channel 4

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