First Direct has launched a new mortgage offering the cheapest rate on the market for those who are not buying a new home.

Mortgage rates have been falling for months, but the best deals on the market have tended to go to those buying new properties, rather than those who already own their homes and are coming to the end of their existing deals.

But a new five-year deal from First Direct with a rate of 3.79 per cent is available to both types of customer.

It is available to those with large deposits or equity in their home – worth a minimum of 40 per cent of their property value – and comes with a £490 fee.

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Liam O’Hara, head of mortgages at First Direct, said: “We’re starting to see more activity in the remortgage market, with more customers shopping around for the best deal, so it’s great to be able to make our most competitive price available to those customers.

“We continue to review our pricing regularly to ensure the best value we can for our customers.”

Aside from this deal, the cheapest on the market for those remortgaging is from Santander at 3.81 per cent, though this comes with a large £999 fee.

New buyers can get lower rates on five-year deals, with the lowest on the market from Coventry Building Society charging a rate of 3.69 per cent.

For shorter two-year mortgage fixes, rates are more expensive. These have not yet got below 4 per cent for those remortgaging.

Mortgage rates have been tumbling for the previous two months. As recently as 22 July, there were no mortgages at all on the market below 4 per cent.

However, even with recent falls, mortgage rates are still far higher than the rates most people coming remortgage are currently on.

In 2019, rates well below 3 per cent were common, and so those coming off five-year fixes are still likely to see an increase in their monthly payments, even with the recent reductions.

But the cuts are still generally good news, as they will mean households are paying less than they otherwise would have.

Experts expect there to be further rate cuts in the coming months, despite the upcoming Budget.

Anthony Codling, managing director at RBC Capital Markets, said: “We expect mortgage rates to fall further in the coming months and with wages continuing to rise the outlook for the UK housing market remains on the up and with housing so high on the political agenda it would be a shock if the budget stopped the recovery in its tracks.”

Tomer Aboody, director of specialist lender MT Finance, added: “A lower base rate, and subsequent mortgage rates, are convincing buyers who have been waiting to buy that now is the time.

“While we await the dreaded Budget, we can expect some caution but hopefully a further rate decrease will ignite the market again for a final push in 2024.”

Hello, I’m Joel Suss — data journalist at the Financial Times and stand-in for Chris Giles while he takes a much deserved break. 

With the recent jumbo Fed pivot, an easing cycle is officially under way across most major western economies. But while the direction of travel is clear, the pace and destination are still highly uncertain.

I’m going to explore competing arguments for a faster or slower pace across a number of central banks and give a steer as to which is most convincing. Let me know if you agree with my analysis — or share yours with me — in the comments below. 

Gradualism under fire in the Eurozone

After a second quarter-point cut on September 12, ECB policymakers were quick to declare another reduction in October unlikely. Influential member Philip Lane summed up the prevailing ECB stance as “a gradual approach to dialling back restrictiveness . . . if the incoming data are in line with the baseline projection”.

But downbeat economic data last week and a larger drop in inflation than expected are testing ECB gradualism and raising market expectations of another cut in October.

At the start of last week, Eurozone PMI surveys showed a sharp and unexpected drop in activity. This was broad-based, with France’s fall into contractionary territory the lowlight. This survey should not be dismissed as simply bad vibes: recent ECB analysis finds a tight correlation between PMIs and subsequent real GDP growth.

Then, on Friday, inflation figures from France and Spain surprised sharply to the downside. The flash estimate of Eurozone inflation released this morning corroborates a larger-than-expected drop in the headline rate — to 1.8 per cent — in September.

At the start of last week, market prices implied a less than 30 per cent chance of a cut in October. By the end of the week, that had risen to more than 80 per cent. ECB president Christine Lagarde, in testimony to the European parliament on Monday, gave the idea of an October cut more credence, saying “the latest developments strengthen our confidence that inflation will return to target in a timely manner”.

What about the argument for a slower pace of cuts? Hawkish members of the ECB point to stubborn wage increases feeding through to services prices. But a careful look at the data reveals a less worrisome picture.

Below I decompose services inflation into items which are wage-sensitive versus those that are not (based on the ECB’s own designation). As you can see, recent increases in services inflation in the Eurozone are due primarily to items that are not wage-sensitive. This amounts to a green light for a faster pace of rate cuts in the Eurozone.

Time to declare victory at the Fed? 

Federal Reserve chair Jay Powell was masterful in communicating the central bank’s half-point move in September. It was a cut of confidence. “The US economy is in good shape . . . inflation is coming down, the labour market is in a strong place, we want to keep it there,” Powell said. Concerns that a larger than normal cut would spook markets were unfounded.

Powell did concede that labour market cooling was concerning Fed rate-setters. But he emphasised that the Fed’s confidence in inflation returning sustainably to target enabled the move.

Not everyone agrees inflation has been vanquished, however. Michelle Bowman was the first Fed Governor in nearly two decades to dissent, arguing for a slower pace of easing. “Bringing the policy rate down too quickly carries the risk of unleashing that pent-up demand,” she said, pointing to prominent “upside risks to inflation”.

A rebound in inflation could happen, and faster than most people appreciate. Recent research using detailed bank transaction data suggests monetary policy shocks have sizeable immediate effects, in contrast to the received wisdom that policy operates only through “long and variable lags”. Alberto Musalem, of the St Louis Fed, echoed this argument in an interview with the FT, saying that the US economy could react “very vigorously” to looser financial conditions. 

The Fed appears split on the pace necessary. So does the market — futures prices yesterday indicated a roughly 60 per cent probability of another quarter-point cut versus 40 per cent for a second half-point cut in November. August inflation figures, released on Friday, did not tip the argument in either direction, with the headline rate a bit lower than expected at 2.2 per cent but core inflation (excluding food and energy) at 2.7 per cent.

Powell’s characterisation of a strong but cooling labour market conforms to the data. Below I’ve plotted where some key data points are in relation to their 2001 to 2019 average values. All are above, and mostly more than one standard deviation above the mean.

Economic growth has been remarkably strong in the US over the past several quarters, and following revisions to GDP estimates on Friday it is even stronger than originally thought. From 2021 to 2023, real GDP was revised upwards by a cumulative 1.2 per cent.

This suggests to me that a slower pace of easing is justified. The market is expecting at least 0.75 percentage points of additional cuts by year end. This is more than I think is likely to be delivered in the context of rude economic strength and a strong labour market. Powell’s speech yesterday confirmed that his baseline is two quarter-point cuts.

But there is a lot of upcoming data to digest ahead of the Fed’s next meeting on November 7, starting with September payrolls and unemployment figures this Friday.

Bank of England

The Bank of England, like the ECB, has been taking a “gradual approach” to reducing rates.

After a first cut in August, the Monetary Policy Committee decided to stand pat in September. Hawks on the committee, led by externals Catherine Mann and Megan Greene, are primarily concerned about a wage-price spiral.

As with Eurozone services inflation above, I’ve decomposed CPI services into wage-sensitive and non-wage-sensitive components. But the resulting picture for the UK looks very different to that of the Eurozone — wage-sensitive services inflation has been steadily increasing over time, whereas wage-insensitive services inflation has been decreasing.

The hawks on the MPC have more to be concerned about on this front, and the BoE is therefore justified in moving more slowly.

Bank of Japan

Most central banks are ruminating about easing rates, but for the Bank of Japan the situation is reversed.

Rather than wanting to see evidence of a dissipating wage-price spiral, the BoJ is eager for signs that the “virtuous” spiral is taking hold.

Despite severe market turbulence following the BoJ’s 0.15 percentage point rise in July, governor Kazuo Ueda last week reiterated the central bank’s confidence that it can continue to normalise policy, although he hinted that the pace would be gradual. The BoJ had “enough time”, Ueda said, to survey economic developments in Japan and abroad. 

The surprise ascension of Shigeru Ishiba as LDP leader and Japan’s next prime minister over Sanae Takaichi removes potential political pressure on the BoJ to reverse course. Takaichi had advocated for easy monetary policy, while Ishiba is supportive of the BoJ normalising rates.

But the BoJ is right to proceed cautiously. It wants to be sure that inflation is going to remain sustainably at target, and policy remains easy even after the recent rise.

What I’ve been reading and watching

A chart that matters

When steeped in central banking communications it is easy to lose sight of how inflation is perceived by the general public.

Central banks focus on their inflation mandate — typically aiming to have the annual rate of overall inflation hit 2 per cent. But people judge inflation in terms of levels rather than rates.

Or as Jared Bernstein, chair of the White House council of economic advisers, put it: “Economists obsess over rates; regular people obsess over levels.”

With inflation nearing 2 per cent, policymakers and politicians have cause to celebrate. But they would also do well to remember that regular people probably won’t be celebrating. In the US, prices are on average 20 per cent higher than they were in 2019, as the chart below shows.

ENERGY bills will rise for millions of households from today as the new price cap comes into effect.

The cap rose by 10%, adding £149 a year to the typical bill of a household with a dual fuel tariff which pays via direct debit.

1

Households will now pay £1,717 a year for their energy, up from £1,568 under the previous threshold.

But energy bills are expected to fall again to £1,697 a year in January, according to the latest predictions from analysts Cornwall Insight.

These thresholds are used to show how much a typical family could expect to spend on their energy bill each year.

But the amount they will actually pay each month will depend on their usage and can be higher or lower than this cap.

The threshold applies to the 28million households who are on a standard variable tariff, which fluctuates with the wholesale price of energy every three months.

Some households are on a fixed tariff, which means the rate they pay stays the same for their whole contract and is not subject to the cap.

To avoid being charged more than you should it’s essential that you submit a meter reading as soon as possible when the price cap changes.

Doing so ensures that all of the energy you used before October 1 is charged at the lower rate.

The exact date you need to submit a meter reading by differs depending on your supplier and some will allow you to backdate the reading to the date it was taken.

Some providers will even give you an extra fortnight to send in your reading.

But if you miss the deadline and do not submit a reading then you will be given an estimated bill.

These bills are calculated based on a prediction of your power use.

This could mean that some of the energy you used before the new cap came into effect could be charged at the wrong rate.

As a result you could receive a bill that is more than the amount you should actually need to pay.

Here we reveal the exact dates that you need to submit a meter reading to each supplier as the energy price cap changes.

When to submit your meter reading

You should try to take your meter reading as close to October 1 as possible to reflect your energy use up until this point.

Once you have taken the reading you have a certain period of time to submit it to your supplier.

The amount of time you have will depend on who your energy provider is.

British Gas customers have until October 14 to send in a reading and can do so online, via its app, web form or by telephone.

Households which are supplied by EDF have until October 9 to send in their meter reading online, via its app, online form, email, WhatsApp, text or over the phone.

E.on Next customers have a week from today to submit their reading and can do so in their online account, via its app, email or by telephone.

Octopus Energy users also have until October 8 to send in their reading and need to do so online, via its web form, app or by email.

At Ovo Energy you can send in your reading in your online account, via its app or over the phone and need to do so by October 11.

Scottish Power customers need to submit their reading by October 5 and can do so through their online account, via its app or by telephone 24 hours a day.

There is no deadline to submit a meter reading at So Energy but you can do so if you have proof of the date you took it.

You can submit it in your online account, by email or by telephone 24 hours a day.

Finally, Utility Warehouse customers needed to give a reading in the five days leading up to October 1 and submit it in their online account, through its app or by telephone.

How to submit a meter reading

The easiest way to take a meter reading is to take a picture of your gas and electricity meters so that you have evidence in case you need to dispute a bill.

You can submit your reading online via your energy account.

Some providers will also let you send in the figures by text or through an app.

Check the options that are available with your own supplier.

Electricity meters

If you have a digital electricity meter, you will see a row of six numbers – five in black and one in red.

Only take down the five numbers in black.

If you are on an Economy 7 or 10 tariff, which gives you cheaper electricity at night, then you will have two rows of numbers and you need both.

If you have a traditional dial meter you will need to read the first five dials from left to right, again you do not need the red ones.

If the pointer is between two numbers, write down the lower figure.

If it is between nine and zero then write down the number nine.

Gas meters

If you have a digital metric gas meter showing five numbers and then a decimal place, you only need to write down the first five numbers.

If you have a digital imperial meter, your meter will read four black numbers and two red numbers – note down the four black numbers only.

If you have a dial gas meter, follow the same steps as the dial electricity meter.

Smart meters

If you have a smart meter then you do not need to submit a reading as this is taken automatically and is sent to your supplier directly.

But you should check that your smart meter is in “smart mode” and is working properly to make sure that you are accurately charged.

You do not need to submit a meter reading if you have a fixed energy tariff or a traditional prepayment meter.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Nvidia sits at the centre of what we’ve dubbed the AI-financial complex, but there are a lot of people that want to make bank from the market frenzy. Cerebras Systems has now filed for an IPO, and it will be an interesting test of just how AI-mad investors have become.

As mainFT quoted a VC as saying in a round-up of pretenders for Nvidia’s throne last month:

There has been a near insatiable desire from public investors to find and back the next Nvidia. This isn’t just about chasing the latest trend. The momentum is also benefiting several VC-funded chip start-ups that have been toiling away for nearly a decade.

As a result, the valuations are appropriately punchy. Bloomberg reported last week that the Silicon Valley-based maker of chips optimised for artificial intelligence was hoping to raise $1bn at a valuation of $7bn to $8bn, for a company that was started in 2016 and only began generating any revenue in 2019.

But Cerebras’s pitch is pretty transparent: by FT Alphaville’s count the summary prospectus alone contains 142 mentions “AI”. We gave up counting the rest of the S-1 filing. It’s core product is a wafer-sized chip . . .

. . . which Cerebras says leads to vastly more memory and faster computing than with other commercially available GPUs.

This enables Cerebras customers to solve problems in less time and using less power. Our AI compute platform combines processors, systems, software, and AI expert services, to deliver massive acceleration on even the largest, most capable AI models. It substantially reduces training times and inference latencies, while reducing programming complexity.

We’re not even going to try to judge the tech here. FTAV is primarily a financial blog and, luckily, there’s a lot there to dig into.

For example, revenues more than tripled in 2023 to $78.7mn, and climbed to $136.4mn in the first six months of 2024. But that still means the company remains deeply unprofitable, with a net loss of $66.6mn so far this year, roughly the same annualised run rate as in 2023.

(Sorry for terrible size, zoomable version here)

Another thing that jumped out was Cerebras admitting in its risk disclosures that “we currently generate a significant majority of our revenue from one customer, G42, and a significant portion of our revenue from a limited number of customers”.

And by significant, Cerebras really does mean SIGNIFICANT, and rising. From the filing, with FT Alphaville’s emphasis below:

Group 42 Holding Ltd (together with its affiliates, “G42”) accounted for 83% and 87%, respectively, of our total revenue for the year ended December 31, 2023 and six months ended June 30, 2024. Our dependence on our relationship with G42 subjects us to a number of risks. Any negative changes in the demand from G42, in G42’s ability or willingness to perform under its contracts with us, in laws or regulations applicable to G42 or the regions in which it operates, or in our broader strategic relationship with G42 would harm our business, financial condition, results of operations, and prospects. Even if G42 remains satisfied with our offerings, it is possible that it will no longer need to purchase additional AI compute or services at the same quantity as prior periods, or that G42’s ability to purchase our products may change for reasons outside of its control. G42 may also choose to purchase more of its AI compute from our competitors.

Further, as of December 31, 2023, customers representing 10% or more of total accounts receivable consisted of four customers (including G42) who accounted for 43%, 22%, 15%, and 15% of our accounts receivable balance. Two customers accounted for 68% and 16%, respectively, of our accounts receivable balance as of June 30, 2024. This customer concentration increases the risk of quarterly fluctuations in our results of operations and our sensitivity to any material adverse developments experienced by, or in our relationships with, our significant customers. The loss of, any substantial reduction in sales to, or the default on payments by, any of our significant customers may harm our business, financial condition, results of operations, and prospects.

So what is the blandly named G42? An AI company based in Abu Dhabi, the capital of the United Arab Emirates, which invested heavily in Cerebras’s 2021 series F and received a somewhat controversial $1.5bn slug of investment from Microsoft earlier this year.

The US has slapped export controls on AI tech that might be passed on to the likes of China, and it seems like the Cerebras chips that it has bought are actually being used in the US, which sounds awkward. Again, our emphasis below:

While we have obtained an export license from BIS to export, reexport, or transfer (in-country) our CS-2 systems to G42 in the United Arab Emirates, all of the systems we have sold to G42, or for which purchase orders have been placed by G42, to date have been or are expected to be deployed in the United States, which does not require an export license from BIS. To the extent that we cannot export to a specific customer without a license from BIS, we may seek a license for the customer. However, the licensing process is time-consuming. There is no assurance that BIS will grant such a license or that BIS will act on the license application in a timely manner. Even if BIS issues a license, it may impose burdensome conditions that we or our customer cannot accept or decide not to accept.

So this is a fast-growing but extremely unprofitable company utterly dependent on selling its products to one of its biggest investors, which might not be able to take them out of the country?

Put FTAV down for a yard.