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Aspiring Lawyers - Interviews & Vacation Schemes
Commercial Awareness Discussion
Open Discussion: Interest Rates, Mortgages, Savings Rates, and the Banking Industry
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<blockquote data-quote="LibbyH" data-source="post: 145127" data-attributes="member: 29849"><p>The current economic client climate of stubborn inflation and hiking interest rates has led to an increase in mortgage rates, more expensive borrowing, and less disposable income for customers. This interest rate hike is aimed at slowing consumer spending, allowing the rate of inflation to cool. However, the intense rate hikes present challenges for the baking industry because fewer investors or consumers will be willing to borrow while rates remain so high and it is uncertain when they will come down away. Moreover, the baking industry has the tricky balancing act of ensuring that saving rates are also increasing so that savings are not eroded by inflation and people are encouraged to save. The current issue of bank being slow to increase savings rates has meant that the FCA is now hot on their heels about increasing rates. However, while increased interest rates make borrowing expensive, banks typically benefit from the rate hike with increased profits. Further, banks could capitalise on these profits to become more competitive. The increase in interest rates and relatively slow increase in saving rates provides a potential opportunity for the banks to offer more competitive saving rates, coupled with easier ways of switching accounts, in an effort to be more competitive and increase custom. On a more global outlook, banks in China have seen interest rates come down slightly, this could make Chinese banks more attractive for investors looking to borrow are more favourable rates. </p><p></p><p>In terms of the legal sector, this is particularly relevant because inflation and interest rates directly impact a lot of law firms' clients, which are often banks. Firstly, there is an opportunity for the regulatory lawyers to be advising banks through this tricky macroeconomic climate, especially given the FCA is looking into banks' savings rates. Secondly, the effect of having expensive borrowing means delayed investments, impacting areas such as M&A deals, which have already slowed down in Q1 this year (ONS). However, for firms with high liquidity, there could be an opportunity for stressed, distressed or insolvent M&A. The increase in interest rates means the payment on loans is more expensive, which is particularly troubling for firms already under financial stress, as it puts pressure on their liquidity levels. This could lead some businesses that are on the brink of insolvency to go under. Hence, insolvency and restructuring lawyers could have more work on their hands in an attempt to save businesses that are in administration.</p></blockquote><p></p>
[QUOTE="LibbyH, post: 145127, member: 29849"] The current economic client climate of stubborn inflation and hiking interest rates has led to an increase in mortgage rates, more expensive borrowing, and less disposable income for customers. This interest rate hike is aimed at slowing consumer spending, allowing the rate of inflation to cool. However, the intense rate hikes present challenges for the baking industry because fewer investors or consumers will be willing to borrow while rates remain so high and it is uncertain when they will come down away. Moreover, the baking industry has the tricky balancing act of ensuring that saving rates are also increasing so that savings are not eroded by inflation and people are encouraged to save. The current issue of bank being slow to increase savings rates has meant that the FCA is now hot on their heels about increasing rates. However, while increased interest rates make borrowing expensive, banks typically benefit from the rate hike with increased profits. Further, banks could capitalise on these profits to become more competitive. The increase in interest rates and relatively slow increase in saving rates provides a potential opportunity for the banks to offer more competitive saving rates, coupled with easier ways of switching accounts, in an effort to be more competitive and increase custom. On a more global outlook, banks in China have seen interest rates come down slightly, this could make Chinese banks more attractive for investors looking to borrow are more favourable rates. In terms of the legal sector, this is particularly relevant because inflation and interest rates directly impact a lot of law firms' clients, which are often banks. Firstly, there is an opportunity for the regulatory lawyers to be advising banks through this tricky macroeconomic climate, especially given the FCA is looking into banks' savings rates. Secondly, the effect of having expensive borrowing means delayed investments, impacting areas such as M&A deals, which have already slowed down in Q1 this year (ONS). However, for firms with high liquidity, there could be an opportunity for stressed, distressed or insolvent M&A. The increase in interest rates means the payment on loans is more expensive, which is particularly troubling for firms already under financial stress, as it puts pressure on their liquidity levels. This could lead some businesses that are on the brink of insolvency to go under. Hence, insolvency and restructuring lawyers could have more work on their hands in an attempt to save businesses that are in administration. [/QUOTE]
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Commercial Awareness Discussion
Open Discussion: Interest Rates, Mortgages, Savings Rates, and the Banking Industry
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