Make Money Investment

The cost of fixed rate mortgages looks set to rise sharply next week after banks and building societies started withdrawing products in response to Thursday’s bank rate rise.

Mortgage brokers were yesterday reporting that several big-name lenders including Abbey and Alliance & Leicester had withdrawn all or some of their fixed-rate deals. Britannia, Bristol & West, Bank of Ireland and a number of smaller building societies were telling mortgage brokers that three-year fixed deals, in particular, were being withdrawn with immediate effect. Most are expected to announce new, higher priced loans from early next week.

Abbey, which has 8% of the mortgage market is expected to increase its fixed rates by 0.3% from next Tuesday. Its two-year fixed will cost 6.29% if bought via a broker - up from under 5% less than a year ago.

The majority of mortgage advisers were yesterday telling consumers to look hard at tracker products in the light of predictions that rates are likely to go to 6% “where they could hang around for some time”.

Following Thursday’s base rate rise, the half of consumers who have mortgages on the standard variable rate can expect them to rise to 7.75%, according to London & Country Mortgages. Repayments on a typical 100,000 home loan will rise by around 16 a month, it said.

Ray Boulger, senior technical manager at mortgage broker John Charcol, questioned whether further rate rises were inevitable, pointing out that many consumers were yet to feel the pain of the previous four base rate rises.

“You have to remember that half of all mortgages in this country are still fixed-rate deals, and as a result the full impact of recent rates rises is yet to be felt. Eighty per cent of those on fixed deals will be coming off them in the next two years. As more consumers feel the pain, spending will come down accordingly,” he said.

Melanie Bien, of broker Savills Private Finance, said “swap rates” suggest the market is expecting rates to go to at least 6%, if not higher.

“The advice is to those looking for a new fixed deal is to act fast as the best ones are disappearing fast. She agreed tracker mortgages, which will follow rates down as well as up, currently look good value, “but only if you can afford it”.

U.S. Treasury debt prices fell on Friday, pushing yields to two-week highs, after strong jobs data dashed some of the remaining expectations that the Federal Reserve would cut interest rates this year.

Unexpectedly robust job growth in June and upward revisions to figures for April and May added to recent downward pressure on bonds. Based on the rise in benchmark yields, the market was on track for its biggest week of losses in just over a year.

The employment report was the latest in a series of data releases to indicate the economy rebounded strongly in the second quarter after a dismal start to the year, suggesting there was no need for a growth-boosting interest rate cut.

Prices on benchmark 10-year notes fell 10/32, pushing yields up to 5.19% from 5.14% late on Thursday. Benchmark yields reached a peak of 5.21 %, their highest since June 22.

Two-year Treasury notes slid 1/32 for a yield of 5.00%. Two-year yields briefly rose to 5.02%, their highest since June 19.

Two-year notes were on pace for their biggest weekly rise in yields since April this year.

Five-year notes dropped 6/32, lifting yields to 5.10% from 5.05%. The 30-year long bond slid 21/32, pushing yields up to 5.27% from 5.23%.

The jobs report, one of the biggest monthly releases on the data calendar, added fuel to global bond market fears of a prolonged fight by the world’s central banks to keep inflation under control.

Euro zone and British debt prices also fell on the news.

In the United States, investors have eliminated most of the last remaining bets on the Fed cutting benchmark rates from their current 5.25%, where they have been for a year.

In addition to the jobs figures, surveys this week showing that manufacturing and service sector growth hit their fastest pace in over a year last month helped to flesh out a robust picture of the U.S. economy.

“The bond market has backed up on the growth data and we expect that to continue throughout the year,” said Michael Pond, Treasury and inflation-linked strategist at Barclays Capital in New York.

“We expect the bond market will factor in rate hikes in the coming months but it will take time to get there,” he added.

The company has also been affected by a slower than expected recovery at its Old Orleans business, which it acquired last year.

While Regent said the medium term outlook remained positive, profits for the year to the end of June will be below current market expectations.

Regent said its entertainment bars - Walkabout and Jongleurs comedy clubs - achieved a sales rise of 2.6% in the 17 weeks to March 31.

But sales since the start of April have been flat on a year earlier, which Regent blamed on a challenging high street trading environment.

Earlier this week, Harvester owner said recent interest rate rises were having an impact on its mid-market pub restaurants.

Regent warned that figures for June were expected to be lower than last year due to comparisons with exceptionally strong trading in the 2006 World Cup.

It pointed out that a number of initiatives, including the completion of improvements to external areas in readiness for the English smoking ban, should ensure that the business remains well placed.

At Old Orleans, which Regent bought from last year, investment in the estate has been carried out later than anticipated, partly due to delays in landlords consenting to assign property leases.

Regent said that once its plans have been implemented, including minor refurbishments and staff development, the estate will be in a position to deliver ’substantial returns’ on investment.

However, the short-term factors will result in group profits missing expectations. The consensus in the City had been for a figure of around 10.3m, slightly lower than the 10.6m reported a year earlier.

The company has 63 bars in its Walkabout and Jongleurs estate, with another 31 Old Orleans.

Other stories:
M&B toasts late drinking
Inventive wants Alchemy’s magic touch
Conlan puts squeeze on Regent
Urbium says no to bid offer
Profits down at Regent Inns
Regent Inns axes staff at London HQ

Spy Program Still Open to Future Challenges Appeals Panel Dismissed Case but Didn’t Examine Case’s Merits By JAN CRAWFORD GREENBURG and THERESA COOK

July 6, 2007

A federal appeals court decision Friday dismissing a lawsuit that challenged the Bush administration’s warrantless wiretapping program is a significant victory for the White House, but it hasn’t closed the door to further legal challenges to the program.

The 2-1 ruling to dismiss the lawsuit, which was filed by the American Civil Liberties Union, did not touch on the merits of the program nor whether the wiretapping was constitutional. The appeals court instead embraced a threshold argument made by the administration: that a group of lawyers and professors did not have legal grounds to challenge the program because they couldn’t show they’d been put under surveillance.

The court also said the program’s challengers couldn’t get access to classified information about the program to determine whether they had been monitored. The ruling, the first for a federal appeals court, could make it more difficult for outsiders to challenge other similar programs.

The Bush administration has vigorously defended the domestic surveillance program, even though the wiretap requests are now run through a court that considers requests under the Foreign Intelligence Surveillance Act.

Expressing disappointment about the ruling, ACLU legal director Steven Shapiro said in a statement that the decision “insulates the Bush administration’s warrantless surveillance activities from judicial review and deprives Americans of any ability to challenge the illegal surveillance of their telephone calls and e-mails.”

“As a result of today’s decision, the Bush administration has been left free to violate the Foreign Intelligence Surveillance Act, which Congress adopted almost 30 years ago to prevent the executive branch from engaging in precisely this kind of unchecked surveillance,” Shapiro said.

But Justice Department spokesman Brian Roehrkasse said in a statement that the program “was always subject to rigorous oversight and review,” and that the opinion “confirms that plaintiffs in this case cannot seek to expose sensitive details about the classified and important Terrorist Surveillance Program.”

The decision throws out an earlier ruling by a federal judge in Detroit who had struck down the program and used sharp rhetoric to excoriate the Bush administration and its policies. The administration felt strongly that the federal judge’s decision was not grounded in law and should not stand.

Friday’s decision also sets important legal limits on who can challenge the program in the future. The decision will not be binding on other federal appeals courts now considering similar issues, but it will provide guidance to them going forward.

The ACLU said Friday that it’s considering its next step and reviewing all its legal options, which could include asking the Supreme Court to take up the case. If the HIgh Court agrees, it could hear arguments as soon as next year.

ABC News’ Ariane de Vogue and Dennis Powell contributed to this report.

GOP Defections on Iraq: Who’s Next? Recent GOP Senators’ Breaks With Bush on Iraq Raise Question of Who’ll Be Next By ANNE FLAHERTY The Associated Press

WASHINGTON

After the recent defection of prominent Republicans on the Iraq war, the big question in Washington is who might be next.

More than a dozen Republican senators who are running for re-election next year head the list of lawmakers to watch. But others, too, have expressed concerns that the GOP has grown increasingly vulnerable on the issue. As the clock ticks toward Election Day, voter pressure is building against any lawmaker still standing with President Bush on the war.

Potential wildcards include members up for re-election who have broken with the president on other issues such as immigration or who face growing anti-war sentiment in their home states. Those include Sens. Saxby Chambliss of Georgia, Ted Stevens of Alaska, Pat Roberts of Kansas, Michael Enzi of Wyoming, James Inhofe of Oklahoma and Jeff Sessions of Alabama.

Norm Coleman of Minnesota already has expressed grave doubts about the president’s Iraq policies, but he hasn’t signed on yet to legislation calling for a change in strategy.

Support among Republican senators is considered crucial to Bush’s Iraq policy. Democrats hold a narrow 51-49 majority and routinely fall shy of the 60 votes needed to cut off debate and advance most anti-war legislation.

But new cracks in Bush’s support base have begun to show. In the past two weeks, three Republicans Sens. Richard Lugar of Indiana, George Voinovich of Ohio and Pete Domenici of New Mexico have announced they can no longer support Bush’s Iraq war strategy and have called on the president to start reducing the military’s role there.

Their announcements took many by surprise because most Republicans have said they are willing to hold out until September to see if Bush’s troop buildup is working.

“I have carefully studied the Iraq situation and believe we cannot continue asking our troops to sacrifice indefinitely while the Iraqi government is not making measurable progress to move its country forward,” Domenici told reporters from New Mexico this week. Instead, Domenici embraced a bipartisan bill by Colorado Democrat Ken Salazar that would put U.S. troops on track to leave by the end of March 2008.

A spokesman for the White House, Tony Fratto, said that position amounts to the same approach sought by the Democrats, “which is, in fact, a precipitous withdrawal.”

“We think that’s absolutely the wrong way to go,” Fratto said Friday. “It would be dangerous.”

Domenici’s remarks were a switch for the 34-year Senate veteran and GOP stalwart. Just three months earlier, he scolded Democrats for a proposal to fund the troops but order them home this fall. While he is still likely to oppose such legislation, Domenici’s rhetoric has changed substantially since April when he said he was committed to giving the military the “time and resources to try to calm Baghdad.”

Domenici’s term in Congress expires next year, alongside 20 other GOP senators. Of those, a dozen or more are expected to run for re-election. Four have signed on to Salazar’s legislation: Domenici, Susan Collins of Maine, John Sununu of New Hampshire and Lamar Alexander of Tennessee.

Sen. Gordon Smith of Oregon, also running for re-election, came out earlier this year in support of separate Democratic legislation ordering troops home this fall.

The wildcards in the debate are senators, like Roberts, Stevens and Chambliss, who have staunchly defended Bush but are watching his poll numbers drop.

Others include senators like Christopher Bond of Missouri who won’t face voters next year but want to take back control of Congress from the Democrats and have expressed concerns about the lack of progress in Iraq.

Sen. John Warner, whose term is up in 2008 but who is undecided on whether to run again, is expected to propose legislation this month calling for a new strategy.

Sensing the shift, administration officials have reached out to Republicans posing alternative scenarios in Iraq to gauge political support, according to one Senate aide.

Sen. Olympia Snowe, among the first Republicans to call for a phased withdrawal of troops, said she wouldn’t be surprised to see more of her colleagues follow suit because the Iraqi government has failed to live up to most of its political promises. She is not up for re-election next year.

“I think (Domenici) is reflecting that depth of frustration” among all members, said Snowe, R-Maine, in a phone interview Friday. “The big question is exactly what everyone’s going to be able to support that represents a change in course.”

As pressure builds for a change in Iraq policy, a top U.S. commander there warned Friday that drawing down troops too soon would create more problems.

“You’d find the enemy regaining ground, re-establishing sanctuary, building more” roadside bombs, Maj. Gen. Rick Lynch told a Pentagon news conference. “The violence would escalate. It’d be a mess.”