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The battle to build India’s military jet engines

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In the 1990s, when India was pursuing economic reforms, testing nuclear weapons and raising its profile internationally, its defence establishment began work on a homegrown military jet engine: the Kaveri, named after a river in the country’s south.

For a nation where self-reliance in industry is a mantra of both Narendra Modi’s government and those that preceded it, the ability to develop and build such powerful technology on its own soil — referred to in India as an “indigenous” product — is one of its biggest dreams.

But producing advanced fighter jet engines is a complex process and the knowledge to make them requires real-world experience built up over decades. Only five countries — notably the current permanent members of the UN Security Council — know how to build them: the US, UK, France, Russia and China. Beijing, however, is just moving from a reliance on imported equipment from Russia and only recently test flew a fighter jet with a supposedly homegrown engine.

India was eager to join the elite club. But despite years of research, prototyping and testing, the Kaveri flopped. India had failed to produce an engine with sufficient thrust to power its current generation of Tejas light combat aircraft. Instead, it plans to use a version of the Kaveri in future unmanned aerial vehicles (UAVs), or drones.

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Yet India’s mission to build an “indigenous” military jet engine is back on. What it learned from its work on the Kaveri, not least its mistakes, may yet bear fruit. According to Indian defence industry officials, foreign diplomats and analysts, the world’s fifth-biggest economy is in an advanced stage of deliberations on producing its first world-class “Made in India” jet engine, working with a western partner that is yet to be decided.

While the foreign partner would bring its technological experience, the engine would be wholly developed and built in India — making it the first truly “indigenous” product of its kind. Once complete, the engine would be fitted into India’s new suite of fifth-generation advanced fighter aircraft due to be airborne by the mid-2030s.

Bar chart of Share of global arms imports, 2019-23 (%) showing India is the world’s leading arms importer

A behind-the-scenes battle is now heating up, involving lobbying, horse-trading, and pledges about future ownership of intellectual property, to become the aerospace partner of choice for the world’s most populous country.

Jostling for the lucrative contract to help India fulfil its ambitions are three key players: General Electric of the US, the UK’s Rolls-Royce, and French group Safran. France and the US are already India’s second and third-biggest defence suppliers after Russia, whose aircraft and other military equipment India is diversifying away from.

Which partner New Delhi chooses would be freighted with geopolitical implications. It comes at a time when India’s international ambitions are rising, its military rivalry with China is deepening, its relationship with the US is expanding and the Modi government is aspiring to join the world’s top tables, including the UN Security Council.

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On the table for the three companies — and the governments backing them — is a decades-long partnership across both defence and civil industries with a fast-growing economy, one that will depend on imported knowhow and kit for years to come.

“Part of the attraction is simply one of scale,” says Douglas Barrie, senior fellow for military aerospace at the International Institute for Strategic Studies. “India will over time require considerable numbers of aircraft as the air force looks to recapitalise combat aircraft fleets.”

India, says Philippe Errera, executive vice-president of international and public affairs at Safran, is “hugely important” for the group, “based on the present and looking into the future”.

“This goes beyond military jet engines, to include defence more broadly but also commercial engines,” he adds.

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Last year, India managed to land an uncrewed spacecraft near the Moon’s south pole. But despite years of trying, it has yet to develop a viable, advanced military jet engine.

Developing an engine large and powerful enough for a civil jet is already extremely complex, analysts say. It relies on knowledge built up over decades, including which materials to use and why and on how to integrate the different parts.

A military jet engine that is capable of delivering world-class performance on a consistent basis brings with it an extra set of challenges, given the higher speeds and tolerances involved. This helps explain why more countries have nuclear weapons capability than the technology needed to keep a fighter jet in the air.

An exposed jet engine on display in a room
Despite research and testing in the 1990s, India’s Kaveri turbofan jet engine failed to meet performance criteria © Bharat-Rakshak

While large civil engines need to maximise fuel efficiency, military jet engines are about the amount of power an engine can produce in relation to weight of the aircraft, analysts say. “No other form of power apart from nuclear comes close to the level of power density you get in a gas turbine,” says one industry expert, who asked not be named because of the sensitivities around discussing large military deals.

Civil airliners fly predictable route patterns and spend much of their time at cruising altitude; military jets have to fly at much higher speeds and with the ability to accelerate quickly. This means, for example, that the bearings in the gas turbine have to be developed to withstand greater tolerances. The engines also use afterburners, which provide a short burst of increased thrust by igniting additional fuel in its exhaust stream.

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Complicating things further, most fifth-generation fighters — like the one being mooted by India — will have their engines embedded within the aircraft frame to minimise their radar and infrared signatures to help avoid detection. All these complexities extend the development and certification programme for military engines.

“India has a technology bottleneck which it has to pass through with gas turbines,” says Prasobh Narayanan, a senior aviation analyst at Janes in Bengaluru. “It is not able to crack that bottleneck on its own, and needs help.”

India’s efforts to develop the Kaveri in the 1990s came at a time of acute strategic challenges, after the Soviet Union — its biggest military supplier — collapsed. New Delhi was also at loggerheads with Washington over its nuclear weapons programme, and began developing military ties with alternative suppliers such as France.

The situation today is far different. India has reconciled with the US and over the past two years the two nations have expanded co-operation in defence and technology. This partially reflects a shift in India’s threat perception; it now sees China, and not its neighbour and long-standing foe Pakistan, as the bigger danger.

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Since Modi took power in 2014, he has stepped up efforts to bring foreign defence groups to India and promote more “indigenous” production in defence, urging private groups such as Tata, Adani and Mahindra to begin making defence products ranging from personnel carriers to drones.

However, the entry of these Indian conglomerates to the defence market over the past decade have failed to make up for the failings of its state-owned groups, led by Hindustan Aeronautics (HAL), India’s biggest aerospace producer. India’s Defence Research and Development Organisation and HAL are set to be the Indian partner in developing the new jet engine. HAL and India’s ministry of defence did not respond to requests for comment.

India abandoned plans for a “Make in India” project to produce French Rafale jets locally, opting instead to buy 36 imported jets in 2016. Today India also remains its biggest defence importer — not a point of pride for a country that aspires to boost its own industrial exports and create desperately needed jobs. China is going to be “increasingly active in the combat aircraft export market and with its own rather than Russian-sourced engines”, says Barrie of the IISS. But he believes Beijing is unlikely to compete in traditional western markets.

The world’s large aero-engine makers have been active in India for decades, forging partnerships with domestic contractors and setting up local manufacturing. Engines by Rolls-Royce powered the first flight of the Indian Air Force in 1933, while Safran is the leading supplier of turbine engines for the country’s military helicopters.

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© Manjunath Kiran/AFP via Getty

$1.8bn

Amount approved by the government for manufacturing, testing and certifying of five advanced military aircraft prototypes

90 years

Length of Rolls-Royce’s long history in India, involving multiple partnerships across the UK aerospace and defence group’s divisions

3,000

People employed by Safran in India (Bangalore plant, above), a workforce the French group says will increase with its expansion

After the Kaveri engine failed to meet performance criteria, HAL turned to GE engines, and uses the US producer’s F404 models in its first-generation Mk1 fighters.

During Modi’s state visit to Washington last year, GE announced it was ready to supply India with its newer F414 engines for the forthcoming Tejas Mk2. The agreement includes the potential joint production of the F414 engines in India.

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GE signalled at the time that it believed that this positioned it well for future work. The US company said it would continue to “collaborate with the Indian government” on the engine programme for the more advanced fighter.


India’s commitment to building its own military jet engine is backed by significant funding. In March, its Cabinet Committee on Security approved funding worth $1.8bn for the manufacturing, testing and certifying of five prototypes for the Advanced Medium Combat Aircraft programme over the next five years.

Indian officials have spoken of inducting the planned jet into the Indian Air Force by the early to mid-2030s, leading to speculation among defence analysts in the country that it will soon decide who its partner on the “indigenous” jet engine will be.

Rolls-Royce and Safran each insist that they are ready to work with HAL, the state-owned aerospace firm, to co-develop a bespoke engine that would entail a full transfer of intellectual property to India, including the right to include it in future exports.

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Britain’s Rolls-Royce has emphasised its long history in India, which stretches back more than 90 years and involves multiple partnerships across its divisions.

“What we are talking about is a gear change,” says Alex Zino, director of future programmes for Rolls-Royce’s defence division. “Now is the time to co-create that IP and that capability in-country, so that it is owned in-country.”

A fighter jet flies over a  mountainous landscape
An Indian fighter jet flies over the city of Leh in the union territory of Ladakh © Tauseef Mustafa/AFP/Getty Images

India, Zino says, would have the freedom to operate, upgrade or modify the co-developed engine, should they partner. Rolls-Royce has been working on its proposal “through and with the UK government”, he confirms.

Safran, too, is promising India similar freedoms to own any engine technology it and HAL co-develop. The French company’s proposal would give India “strategic independence in terms of empowering the country to design, develop and produce state of the art military jet engines domestically and export them”, says Errera, the Safran executive.

GE’s offer, by contrast, would withhold a small portion of the IP on any future co-developed jet engine, according to two people familiar with its plans. “Some things the US, from a national security perspective, might want to retain,” says one of the people. GE declined to comment.

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Some US officials remain wary of India’s continued close relationship with Russia, analysts say, meaning Washington and GE might be less willing to part ways with coveted technology in its entirety. Although India and the US are co-operating more closely than ever, including on defence, New Delhi retains ties and trading relationships with not only Moscow but other governments, such as Tehran, that are inimical to Washington.

Working in GE’s favour, however, is geopolitics and India’s deepening relationship with the US — part of a joint strategy to build an “Indo-Pacific” bulwark against China. India is already deploying multiple US defence platforms, including helicopters, howitzers, and mobility aircraft, and is in the process of agreeing a major contract for long-endurance UAVs with General Atomics.

An unmanned aerial vehicle on display at a trade show
A Tunga Sanjay unmanned aerial vehicle (UAV) on display at a trade show in Chennai, Tamil Nadu. India is in the process of agreeing a major contract for long-endurance UAVs with General Atomics © Arun Sankar/AFP/Getty Images

“I think the American offer is the most serious one,” says Amit Cowshish, a retired senior civil servant formerly active in India’s defence ministry. “The Americans could possibly be pushing harder with the kind of clout they have, which is much more than that of any other country.”

France has made an appeal based on its own burgeoning relationship with New Delhi. Safran employs just under 3,000 people in India — a number it says will grow as it expands its operations there. The French group, in which the government holds an 11 per cent share, plans to open a maintenance facility in the aerospace and tech hub of Hyderabad, a city in southern India’s Telangana state, next year. The site will support the Leap engines Safran makes through its CFM International, a joint venture with GE Aerospace, and which power the majority of the Airbus A320 family of commercial jets.

“We have stood by your side through thick and thin,” Safran’s chair Ross McInnes assured an audience at India’s Defence Conclave earlier this month. “The same cannot be said of your other western partners,” he added, noting that France was the only western country that stood with India after the uproar over its nuclear tests in 1998.

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Errera echoes the point, saying there is “more predictability and more stability in the relationship” with France than with its rivals. And unlike the US, where Congress needs to sign off on big defence deals, the French government could green light any future co-operation.

India’s government and HAL have given no indication of when they will issue the first “request for information” to potential engine partners.

Although India’s state-dominated defence establishment tends to move slowly, and with limited transparency, analysts and officials say New Delhi will need to quicken its pace if it wants to keep up on defence.

“If they don’t make the decision, soon they will be missing the deadline” for a decision on their engine programme, says Raji Pillai, resident senior fellow with the Australian Strategic Policy Institute, a Canberra-based think-tank. “India’s fighter jet numbers are depleting pretty fast.”

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India denounces ‘stifling’ EU carbon tax on imports

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India’s finance minister Nirmala Sitharaman has denounced the EU’s planned carbon tax on imports as an arbitrary “trade barrier” that will hurt the world’s fastest-growing large economy and other industrialising nations.

Sitharaman said the EU Carbon Border Adjustment Mechanism (CBAM), under which tariffs are to be levied from 2026, would impede developing countries’ transition away from fossil fuels by making the change harder to fund.

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“They are unilateral and are not helpful,” Sitharaman told the Financial Times’ Energy Transition Summit India in New Delhi. “Absolutely, it is a trade barrier.”

“You are being stifled by steps which are not going to facilitate the green transition,” she added.

The CBAM is intended to penalise embedded carbon emissions from the production of goods imported to the EU such as cement, fertilisers, iron and steel, and chemicals. The tax, which was approved last year, has triggered alarm among India’s fast-growing heavy industries, which fear it could wipe out one of their biggest markets.

A report by the New Delhi-based Centre for Science and Environment estimated the CBAM would result in an additional 25 per cent tax on carbon-intensive goods exported from India to the EU, a burden that at 2022-23 levels would be equivalent to 0.05 per cent of the country’s GDP.

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India relies on coal for more than half of its electricity generation and to directly power much of its production of goods such as steel.

New Delhi has also been riled by a controversial EU anti-deforestation law that will block foreign companies from exporting to the bloc if their products are deemed to have contributed to forest loss.

After widespread international criticism of the deforestation law, which was meant to enter into force in December, Brussels last week proposed a one-year delay to its implementation.

Sitharaman said India was on track to be a net zero carbon emitter by 2070, barring “unilateral” external challenges such as the EU carbon tariff and deforestation initiatives.

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“That is another one of those steps which can hurt countries like India,” she said of the deforestation rules. “You will have major disruptions in the supply chain, that’s not going to help countries spending a lot on transition costs.”

Under the CBAM, exporters to the EU must register the emissions produced in creating their products, with charges kicking in from 2026. The EU is confident the measure would survive a possible challenge at the World Trade Organization because it applies to domestic producers as well imports.

Sitharaman said India had raised concerns with the EU “several times” and would do so again, but that she did not expect the issue to affect ongoing free trade negotiations with the bloc.

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“I’m sure it won’t be escalated to the level of hurting the talks,” the finance minister added. “But our concerns will definitely be voiced.”

Ignacio Garcia Bercero, non-resident fellow at the Breugel think-tank in Brussels, said the EU measures were being taken to meet the global challenge of climate change and damage to nature, not for protectionist reasons.

“We are not going to meet internationally agreed global goals to stop deforestation unless importing countries contribute. Europe does not produce most of these commodities so it is not protectionist,” he said.

On CBAM, Bercero said the EU’s heavy industry was paying more for emissions and without the tariff would simply be forced out of business by cheaper imports from countries without a carbon tax.

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Ngozi Okonjo-Iweala, the WTO director-general, told the FT last month that global carbon pricing was necessary, but that poorer countries should pay less.

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Moment Martin Lewis slams ‘you’re taking money from pensioners’ in clash with cabinet minister over Winter Fuel Payments

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Moment Martin Lewis slams 'you're taking money from pensioners' in clash with cabinet minister over Winter Fuel Payments

MARTIN Lewis has clashed with government minister Lisa Nandy over the decision to scrap the £300 Winter Fuel Payments for millions of pensioners.

The fiery exchange on Good Morning Britain today saw the Money Saving Expert founder slam the move as “indefensible” and call out the government for failing to reach the poorest pensioners.

Martin Lewis slammed Culture Secretary, Lisa Nancy, on Good Morning Britain

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Martin Lewis slammed Culture Secretary, Lisa Nancy, on Good Morning Britain
Martin called the government out for failing to reach the poorest pensioners

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Martin called the government out for failing to reach the poorest pensioners

Speaking directly to the Culture Secretary, Lewis didn’t hold back.

The money-saving guru said: “Why are you defending this?

“You’ve been a campaigner for the poorest in society for so long, yet you’re sitting there defending a policy that charities like Age UK are pulling their hair out about.”

The row comes after AgeUK urged the government to scrap the policy, warning that the poorest pensioners, some earning under £11,000 a year, will be left without support.

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Lewis was especially concerned that many of the elderly eligible for pension credit wouldn’t apply for it – and therefore miss out on the vital £300 Winter Fuel Payment.

The argument heated up as Lewis continued to press Nandy on the government’s failure to reach those most in need, describing the policy as a “huge flaw.”

He said: “You believe they should get pension credit and the Winter Fuel Payment, but you’re not doing enough to make sure they do.

” You’re not writing individual letters to the hardest-to-reach pensioners.

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Martin Lewis energy warning

“‘There’s lots you could do. So to try and talk about it, ‘we’re targeting the poorest’… The truth is you’re not targeting them. Why aren’t you writing them bloody letters?’

“You have to accept that there are hundreds of thousands of pensioners earning under £11,400 who will not get this payment this year.”

In response, Nandy defended the government’s efforts, pointing to the rise in pension credit claims, claiming that a “huge drive” had resulted in a 115 per cent increase in applications.

But Lewis wasn’t convinced, he added: “It will take four years for everyone to be signed up. And what’s the solution now? Why aren’t you writing them bloody letters?”.

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Despite the tension, Nandy stuck to her guns, stressing that the government was writing letters to eligible pensioners, but acknowledged the frustration from campaigners like Lewis.

The Sun’s Winter Fuel S.O.S Campaign

WORRIED about energy bills? The Sun’s Winter Fuel SOS crew are taking calls on Wednesday.

We want to help thousands of pensioners worried about energy bills this winter, with tips and advice on how to make cash go further.

Our Winter Fuel SOS crew will be able to help answer your questions on whether you can get Pension Credit and the Winter Fuel Payment.

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Ten million OAPs are set to lose the £300 Winter Fuel Payment due to government cutbacks.

It comes in the same month that millions of households are hit by a ten per cent rise in bills as the Energy Price Cap shoots up.

We can help with advice on how else to save money.
Our phone line is open 7am to 7pm Wednesday October 9 – you can call us on 0800 028 1978.

Or you can email now: WinterfuelSOS@the-sun.co.uk

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Nandy said: “We are working with a wide range of people to reach those who need help.

“I just want to make it clear, we are not leaving anyone high and dry.”

What’s at stake for pensioners?

With changes announced in July, the government confirmed that from this winter, only pensioners who claim pension credit or certain other means-tested benefits will be eligible for the Winter Fuel Payment.

Previously it went to around 11million of state pension age regardless of income.

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But around 880,000 eligible pensioners on the lowest incomes may miss out on the energy help because they haven’t claimed pension credit.

Lewis pressed further, saying: “You’re taking money out of their hands.

“Are you willing to accept the collateral damage of pensioners, many with dementia, not getting the Winter Fuel Payment?”

Nandy responded, insisting the cut-off point for pension credit applications had been extended to April 2025.

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This means pensioners who are eligible, but have yet to apply, can still receive backdated payments.

Typically claims for pension credit can be backdated up to three months.

As the qualifying week for the payment is September 16 to 22, It means the last date for claiming the benefit is December 21.

We’ve asked the government which date applies and will update when we hear back.

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DON’T MISS OUT

The message is clear: if you’re eligible for pension credit, it’s crucial to act fast.

Applications are still being accepted, but pensioners must apply by December 21 to receive this year’s Winter Fuel Payment.

Lewis, however, remains sceptical that many of the most vulnerable will get the help they need.

With Christmas just around the corner, time is running out, and the pressure is on for the government to ensure no one is left out in the cold.

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Martin is pictured in a heated row with Lisa Nancy over Winter Fuel Payments

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Martin is pictured in a heated row with Lisa Nancy over Winter Fuel Payments

How to apply for pension credit

YOU can start your application up to four months before you reach state pension age.

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Applications for pension credit can be made on the government website or by ringing the pension credit claim line on 0800 99 1234.

You can get a friend or family member to ring for you, but you’ll need to be with them when they do.

You’ll need the following information about you and your partner if you have one:

  • National Insurance number
  • Information about any income, savings and investments you have
  • Information about your income, savings and investments on the date you want to backdate your application to (usually three months ago or the date you reached state pension age)

You can also check your eligibility online by visiting www.gov.uk/pension-credit first.

If you claim after you reach pension age, you can backdate your claim for up to three months.

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Germany expects economy to shrink after cutting 2024 forecast

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Germany is facing its first two-year recession since the early 2000s, as the government downgraded its growth forecast for 2024, predicting a contraction of 0.2 per cent.

“The situation is not satisfactory,” Robert Habeck, economy minister, said on Wednesday. “Since 2018, the German economy has not been growing strongly any more.”

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Just a few months ago he had forecast the economy would grow by 0.3 per cent this year.

Germany has been battered by high interest rates, inflation and an increasingly uncertain geopolitical environment, which has suppressed consumer demand and investment activity.

Some companies, complaining of high labour and energy costs, a big tax burden and political turbulence, are considering locating some of their production to cheaper countries.

At the same time, consumer spending remains depressed, despite an increase in real wages and falling inflation. The government’s earlier forecast had expected a more robust rebound in consumer demand.

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Political instability is also taking its toll on sentiment. Chancellor Olaf Scholz’s three-party coalition is riven by policy conflicts and the rise of populist parties on the far right and far left is undermining business confidence.

Ministers said the economy was increasingly beset by both structural problems, such as demographic change, and short-term challenges such as weak domestic and foreign demand.

“Early indications such as industrial production and the business climate suggest this phase of economic weakness will last into the second half of the year,” the economy ministry said in a statement.

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However, the government also forecast the economy would grow by 1.1 per cent next year and by 1.6 per cent in 2026.

The ministry said a revival in private consumption and in international demand for industrial goods, as well as a resurgence in investment activity, would power an economic recovery at the start of 2025.

If Habeck’s prediction for this year proves accurate, Germany will experience its first two-year recession in more than 20 years. The economy shrank by 0.3 per cent in 2023. In 2002, it contracted by 0.2 per cent and in 2003 by 0.5 per cent.

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Mortgage lenders hike interest rates and pull lowest deals amid market uncertainty

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Mortgage lenders hike interest rates and pull lowest deals amid market uncertainty

BORROWERS could face a surge in mortgage costs as rates increase and lenders withdraw their cheapest deals.

Coventry Building Society, Co-operative Bank, Molo, and LiveMore have all announced plans to raise their rates in the coming days.

Experts predict other lenders will soon follow suit

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Experts predict other lenders will soon follow suitCredit: Alamy

It follows an increase in swap rates, which are used to price fixed rate mortgage deals.

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As swap rates rise, mortgage lenders tend to increase their rates to avoid financial losses.

The two-year swap rate was 4.06% as of 7 October, while the five-year swap rate was 3.81%, according to Chatham Financial.

These figures are higher than the respective rates of 3.91% and 3.56% recorded in September.

At Coventry Building Society, all fixed rates offered at 65-75% loan-to-value (LTV) for new borrowers, as well as all two and five year fixed remortgage rates at 80% LTV, will rise at on Friday.

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Prior to these latest changes, Coventry offered a 3.69% five-year fixed-rate mortgage, one of the lowest rates on the market.

Co-operative Bank will withdraw some of its lowest rates Thursday night.

Experts predict other lenders will soon follow suit.

David Hollingworth, associate director at L&C Mortgages, said: “The mortgage market has seen rates fall in recent months, but that may be coming to an abrupt halt.

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“Fixed rate pricing depends on what the market anticipates may happen to interest rates and uncertainty over the forthcoming budget, mixed messages from the Bank of England and global unrest is pushing costs back up for lenders.”

HSBC, Metro Bank, Santander, and Yorkshire Building Society told The Sun they are keeping their fixed rates under review.

How Jasmine Cleared £27k Debt with Simple Hacks (1)

Why is this happening?

A variety of factors have unsettled market expectations, causing an increase in both gilt yields and swap rates, according to Nicholas Mendes, mortgage technical manager at John Charcol.

He said: “First, Andrew Bailey’s recent comments, in which he indicated expectations for larger or more frequent interest rate reductions, have introduced some uncertainty.”

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Currently, interest rates stand at 5%.

The rate, which banks use to determine the interest on mortgages and loans, was last reduced from 5.25% in August.

Nicholas added: “Markets had been pricing in interest rate cuts for November and December, but expectations for December have softened slightly.”

This shift has occurred because various members of the Bank of England Monetary Policy Committee (MPC) have expressed views contrary to those of Andrew Bailey.

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Last week, MPC member Huw Pill indicated that rates should be reduced “gradually,” citing caution over the long-term trajectory of inflation.

A similar situation arose at the beginning of the year when mortgage rates initially fell below 4%, only to be increased again as it became apparent that the Bank of England would not reduce rates as swiftly as anticipated.

The Bank of England will decide whether or not to cut interest rates on November 7.

What are the different types of mortgages?

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We break down all you need to know about mortgages and what categories they fall into.

A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years.

Your monthly repayments would remain the same for the whole deal period.

There are a few different types of variable mortgages and, as the name suggests, the rates can change.

A tracker mortgage sets your rate a certain percentage above or below an external benchmark.

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This is usually the Bank of England base rate or a bank may have its figure.

If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced.

A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one.

SVRs are generally higher than other types of mortgage, so if you’re on one then you’re likely to be paying more than you need to.

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Variable rate mortgages often don’t have exit fees while a fixed rate could do.

What does this mean for mortgage holders?

Swap rates primarily influence fixed-rate mortgages.

As a result, these are the main products that lenders are currently increasing.

Those on standard variable and tracker deals remain unaffected, as these mortgages are tied to the Bank of England’s base rate, which has not changed.

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If you are already locked into a fixed-rate deal, you will also be unaffected.

However, the rise in fixed rates will be a significant blow to prospective homebuyers and those looking to remortgage.

According to the banking trade body UK Finance, approximately 1.6 million mortgage deals are set to expire in 2024.

This means that over a million households also face the prospect of their monthly payments increasing by hundreds of pounds.

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According to moneyfactscompare.co.uk, the average two year fixed rate homeowner mortgage stands at 5.37%.

This is down from an average rate of 5.56% last month.

Meanwhile, the average five-year fixed residential mortgage rate is 5.21%, a decrease from 5.37% the previous month.

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How to get the best deal on your mortgage

IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.

There are several ways to land the best deal.

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Usually the larger the deposit you have the lower the rate you can get.

If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.

Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.

A change to your credit score or a better salary could also help you access better rates.

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And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.

You can lock in current deals sometimes up to six months before your current deal ends.

Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.

But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.

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To find the best deal use a mortgage comparison tool to see what’s available.

You can also go to a mortgage broker who can compare a much larger range of deals for you.

Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.

You’ll also need to factor in fees for the mortgage, though some have no fees at all.

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You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.

You can use a mortgage calculator to see how much you could borrow.

Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.

You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.

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The Fed should create a hurricane crisis facility

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Nathan Tankus is the research director of the Modern Money Network. He also writes the Notes on the Crises newsletter.

Hurricane Helene only dissipated September 29th, and Hurricane Milton — the first “category 6” hurricane, a category that has not yet even become generally accepted as a possibility — is set to make landfall today. Swift and sizeable disaster aid is going to be essential.

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However, budgetary fights have left the Federal Emergency Management Agency with only stop-gap funding that they have already run through because of Hurricane Helene (along with four other natural disasters that have happened in the past few weeks alone.) Put simply, the funding to respond to Milton is not currently in place, and House Speaker Mike Johnson says he won’t call an emergency session of Congress to secure more FEMA funding.

Since Congress is only set to reconvene after the election, this could mean a new FEMA appropriations bill could take a month or more to be passed. Regardless of the final outcome in this particular situation, it’s clearly far from ideal for responses to increasingly disastrous hurricanes to live or die by ever more fickle vicissitudes of short-term Congressional appropriations negotiations. 

Enter the bond market. The Council of Development Finance Agencies is pushing the creation of a permanent category of “disaster recovery bonds” that would be exempt from federal taxation and issuable on the declaration of a state of emergency at the state level.

The point is that a federal subsidy for disaster relief would be available instantaneously at the local level rather than having to wait on federal dollars, which are often painfully delayed and inadequate. It also would be at their initiative since the state government — or a “political subdivision” such as a county — could decide the quantity and timing of the bonds they issue.

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Of course, municipal bond markets are infamously illiquid precisely because of their reliance on complicated tax exemption subsidies. So it’s questionable whether further reliance on tax exemptions is really the best approach to supplying timely disaster relief finance. Regardless of whether we do, liquidity support would surely make municipal issuers more confident.

If this is all sounding vaguely familiar, it should. The Federal Reserve created the Municipal Liquidity Facility in April 2020 to deal with the financial effects of Covid-19 on municipalities.

Despite various problems, including its onerous pricing, it establishes a firm precedent for using the Federal Reserve’s 13(3) authority to lend in “unusual and exigent circumstances” in order to support municipalities. If natural disasters are not “unusual and exigent circumstances”, nothing is.

What would such a program do? Provide direct lending to municipalities just as the Municipal Liquidity Facility did. Eligibility would, similar to CDFA’s proposal for permanent disaster relief bonds, be based on the declaration of a state of emergency at the state level (or the territorial equivalent). The facility should have uniform pricing, and maturities maximised to make the most effective disaster responses possible.

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Still panicky about inflation — and risk adverse in general — it’s understandable that the Federal Reserve has not taken the initiative in getting involved in disaster relief financing. But the Fed isn’t simply a financial market policymaker; it’s America’s pre-eminent macroeconomic government agency. And disaster-ravaged areas are part of the economy too.

It would be a dereliction of duty for the Fed to not get involved in making disaster-financing smoother. Whatever concerns there would be from the demand effects of ensuring timely and sufficient disaster financing must be weighed against the supply chain and productive capacity effects of allowing recovery efforts to be slower and less sufficient. 

More generally, this problem is probably only going to grow and grow in frequency and magnitude. Short-term considerations regarding the state of inflation shouldn’t define how the US central bank prepares for this. It should (if it has not already done so) develop contingency plans for a disaster relief liquidity facility.

If the Fed is unwilling to step into disaster financing for fear of Congressional criticism, then it should open such contingency plans up for public debate. Let the National League of Cities, the Council of Development Finance agencies, local constituencies and the general public react. Permanent natural disaster bonds would clearly fit seamlessly with such a liquidity facility proposal.

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The Fed is, above all else, worried about its credibility and reputation. But being seen to help assistance reach ordinary people when they need it most would enhance its reputation in the public. Only acting urgently when bankers are in trouble is a reputational risk the Fed shouldn’t discount.

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