Latest news with #TheBankofEngland
Finextra
20-05-2025
- Business
- Finextra
What is deep learning?
0 This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. Artificial intelligence (AI), a concept once confined to the realms of science fiction, has in the last several years entered the mainstream – with the release of OpenAI's inaugural ChatGPT model, and other competitor engines subsequently, transforming innumerable industries. Often uttered in conjunction with 'AI' is the term 'deep learning', though its nature and use cases may be less clear to the layman. While AI is a broad field encompassing a machine's capacity to perform tasks historically necessitating human intelligence, deep learning is a subset of machine learning (ML) which leverages artificial neural networks with multiple layers to learn from complex datasets. According to the third survey on AI and ML in UK financial services by The Bank of England and the Financial Conduct Authority (FCA), published in November 2024, 75% of firms are already using AI, with a further 10% planning to use it over the next three years. Foundation models form 17% of all AI use cases supporting anecdotal evidence for the rapid adoption of this complex type of machine learning. But what's the draw? How does deep learning work exactly? What is its relevance to financial services? This short read explores the phenomenon of deep learning; its structures, models, applications, and broad use cases. The inner workings Deep learning is a specific kind of ML, which leverages artificial neural networks – as opposed to algorithms – to glean patterns from complex or unstructured datasets. Neural networks are inspired by the structure of the human brain; comprising a collection of nodes, each is its own processing unit. By passing data that is statistically significant from one layer of nodes to the next, neural networks can train themselves to recognise patterns in information and make predictions, with little human intervention. Neural networks are typically split into three layers: Input layer The nodes in this layer receive and process input data – be it structured, unstructured, multi-media, plain text, or other. Hidden layer This slice is sometimes composed of hundreds of subset layers. It receives data from the input layer and processes at different levels, analysing the problem from numerous perspectives and adapting its behavior as new learnings are gleaned. Output layer The nature of the output layer depends on the system and its goal. A 'yes' or 'no' (binary) output model, for example, would only require two nodes. More complex systems, such as Generative AI (GenAI), would require a highly complex set of nodes, in order to deliver nuanced outputs and unstructured information – videos, images, or analyses. The unique architecture of deep learning technology makes it the delivery engine behind many everyday AI systems, such as chatbots and code generators, digital assistants, fraud detectors, and facial recognition. The models Deep learning systems can be arranged in many different models. The three most common are: Convolutional neural network (CNN)s CNNs excel at identifying objects in images – even when they are obscured or distorted. As such, image recognition and processing are the domain of CNNs. Deep reinforcement learning This kind of model is most often deployed in robotics or gaming; enabling an agent to learn how to behave in an environment by interacting with it and receiving rewards or punishments. Recurrent neural network (RNN)s RNNs are very good at understanding sentences and phrases in a contextual manner. They are often used for speech recognition, translations, or to generate text. This capability is otherwise known as natural language processing (NLP). Other deep learning models include autoencoders and variational autoencoders; Generative adversarial networks (GANs); diffusion models; and transformer models. The applications Thanks to the sheer variety of models available to deep learning technology, it boasts countless applications – particularly within financial services. Here is a (non-exhaustive) list of uses, to give an idea of its scope: Computer vision – mines information and insights from images and videos; for quicker and more secure customer onboarding Speech recognition – interprets and analyses spoken language; for better Know-Your-Customer (KYC) processes NLP – extracts meaning from text and documents; for streamlined back-office processes Recommendation engines – tracks end-user activity and develops product or service recommendations; for hyper-personalisation and enhanced customer care GenAI – creates new content and communications; for enhancing the capabilities of developers or providing customers with AI agents Digital labour – performs the heavy lifting in operations; for robotic workforce support and augmentation The use cases As we have seen, deep learning can be applied to numerous areas within financial services. To bring these examples to life, here is a real-world use case, whereby deep learning helped one organisation analyse financial data for equity trades. In 2021, the independent algorithmic trading technology provider, Pragma, released execution algorithms with deep-learning capabilities. Pragma initiated the project to see if deep neural networks could be applied to an execution algorithm's micro-trading engine; governing decisions such as the routing, sizing, pricing and timing of orders – and deal with complex multi-dimensional trading challenges more effectively. Following a beta launch in 2020, Pragma managed several controlled trials with its clients. It observed a significant improvement in execution quality, with an average shortfall improvement of 33% to 50% across billions of traded shares. The future of deep learning If we accept that technological innovation versus time assumes an 'S' curve, then we can safely predict that we have many more years – perhaps decades – until the full potential of deep learning and AI is laid bare. The key to leveraging this transformative technology in the meantime is overcoming the implementation challenges – and ensuring our vast volumes of input data are clean, accurate, integrous, representative, and accountable. In the future, when we look back on the developments in AI that are underway today, we will see the vestigial origins of these principles in our data protection regulations. Yet, to ensure the output of deep learning remains effective, equitable, and sanitary, they will need to be applied scrupulously.
Business Mayor
10-05-2025
- Business
- Business Mayor
Tips from first-time buyers: 'We bought a £320,000 home aged 26'
Lucy Acheson Business reporter Cameron Smith Georgia and Cameron saved for nearly three years for their deposit The Bank of England has cut interest rates for the second time this year – welcome news for first-time buyers after years of rising mortgage costs and spiralling house prices. But it's still tough. More than half of first-time buyers still rely on the so-called bank of mum and dad to get on the property ladder, with an average of £55,572 given in loans and gifts last year, according to estate agents Savills. We've spoken to people on a range of incomes who have managed to make it on to the ladder or are on the brink of buying. They shared with us the tactics they used to buy. 'We used a Lifetime ISA' Cameron Smith and Georgia Pickford, both 27, each opened a Lifetime ISA (LISA) in order to buy a three-bedroom flat in Hertfordshire together for £320,000 last year. The scheme allows 18 to 39-year-olds to save up to £4,000 a year, with a 25% government bonus, as long as it's used to buy a home under £450,000. Cameron earns £40,000 and Georgia £37,000 and they each set up a direct debit to their respective LISA accounts. 'Every month, £200 came out of my paycheque – no excuses, no distractions,' says Cameron. In just under three years, the couple saved £27,740, including the government bonus from their LISAs. To reach the full deposit amount, they topped this up with an extra £4,260 from their personal savings. But Cameron says the scheme hasn't kept pace with rising prices. 'The £450,000 cap was set back in 2017 – it hasn't moved. If your property is even £1 over that, you lose the bonus and get hit with a 25% penalty.' Following calls from campaigners for the terms to be updated, the Treasury Committee is reviewing whether Lifetime ISAs are still fit for purpose. Brian Byrnes, head of personal finance at Moneybox, a digital savings and investment platform, still thinks the scheme is a great option for first-time buyers. 'The Lifetime ISA works fantastically well for the vast majority of customers. Less than 1% are impacted by the £450,000 cap,' he says. 'I used an income booster mortgage' Abas Rai, 26, used a type of joint mortgage known as an 'income booster mortgage' to buy his first home – a £207,000 two-bedroom house in Suffolk. Read More Tesla stock downgraded again. Here's how to trade it now It's a product offered by some lenders that lets a family member's income be added to yours, even if they're not living in the property, to increase how much you can borrow. Even with a £30,000 deposit and a £33,000 salary, Abas struggled to get the loan he needed. To boost his affordability, he added his father, who earns £24,000, to the mortgage. By combining their incomes, the bank was able to offer a bigger loan, though it meant his dad would also be liable if he defaults. 'The bank added our incomes together and then multiplied it by 4.5 – that's how they worked out the affordability.' But involving a parent comes with some challenges. 'Because the person added on to the mortgage is also added on to the property, one of the risks was my dad's age – he's 55 and coming to retirement soon, so I won't be able to rely on his salary if I default on a payment.' Abas plans to re-mortgage and remove his dad once his income increases, but says the scheme was worth it. 'If you're not earning above, say £45,000, and you've got someone in the family, I would recommend you go for it.' 'We moved 150 miles to a cheaper area' After years of renting in Oxfordshire, Alex Bonfield, 34, has relocated to Manchester to buy her first home. 'My wife is a teacher and she had to find an entirely new job up here. She really loved her old school, but this was more important,' she says. 'It wasn't an easy decision. We don't know anyone here.' The couple were priced out of buying near family and friends in Oxfordshire, where average house prices are £479,000, compared with £251,000 in Manchester. They began saving five years ago, and are now house-hunting in the £300,000-325,000 range with a deposit of £50,000. 'We're not at the very top of our affordability, but we are quite high up.' They're far from alone. According to Santander UK, 67% of first-time buyers over the past two years have relocated to get on the property ladder. 'I went for shared ownership and a lodger' 'We were tired of doing that dance every year with the landlord trying to hike up rent by stupid amounts,' Oliver says. 'Now we're saving around £1,000 a month compared to our old flat.' Shared ownership schemes let buyers purchase a portion of a property and pay rent on the rest. They're often more accessible but come with complexities, like service charges and limited resale flexibility. Oliver's total monthly costs come to around £1,550, including £500 for the mortgage, £800 in rent on the 75% share he doesn't own, and a £250 service charge. While he and his lodger informally split costs, Oliver covers all the housing payments. 'My mortgage rate is 5.4%, but the rent on the unowned portion is only about 2% of the property value. 'It's cheaper to just own part of the property and pay rent than to buy the whole thing with a big mortgage.' 'The Help to Buy ISA worked for me' Daniel Price, 27, bought a three-bedroom home in the South Wales Valleys earlier this year, not far from where he grew up. He started saving four and a half years ago using a Help to Buy ISA – a government scheme that topped up savings by 25%, up to a £3,000 maximum bonus. It has since been replaced by the Lifetime ISA scheme. 'Originally, my mum told me about it, so I just put a pound in to open the account,' he says. 'I paid in £200 a month and eventually saved £11,000, which got me a £2,500 government bonus.' House prices in the South Wales Valleys tend to be lower than in many other parts of the UK, which can make home ownership there more achievable for first-time buyers. Daniel bought his house for £95,000, below the asking price of £110,000, due to some minor renovations the property needed. 'A lot of houses were out of my price range as a single person, so I started looking further afield.' 'My dad found the house on Rightmove and showed me it. Everything was a bit outdated, but still liveable. It just needs a bit of work to modernise it.' When he first applied for a mortgage in October 2024, Daniel was earning £18,000 a year while doing a software development apprenticeship. By the time the sale went through in January this year, his salary had risen to £24,000. 'I started saving when I was working in a factory as a warehouse manager. I then took up a tech apprenticeship and have just finished it. That helped with my affordability.' 'I bought a fixer-upper' Camilla De Cesare, 32, is a strategy consultant. She managed to buy her first home in London alone, but says it took seven years of living with her parents and being open to buying a property that needed some work. 'My family helped me with the deposit, and I had a stable job, so I was starting from a fortunate position,' she says. Camilla saved and invested a total of £80,000 into the S&P 500, which tracks the performance of 500 leading companies listed on the US stock market. By steadily contributing over time and benefiting from market growth, her investment pot eventually grew to £150,000. 'I was really lucky that the S&P 500, was growing really well over the years that I was investing in it, so it provided me with a really healthy cushion.' She spent £50,000 on her deposit, and the remaining £100,000 will go towards renovations on the property over the coming years, like a new kitchen and bathroom. She says saving for a deposit felt more manageable knowing she could tackle renovations gradually, as and when she could afford them. 'I think when you first get the keys you just want to do it all at once. But there's something satisfying about looking around and knowing you did some of it yourself.' Tom Francis, head of digital advice at financial advisers Octopus Money, says most people would benefit more from 'slow, steady saving'. He encourages prospective buyers to break their spending into three buckets: essentials, desirables and indulgences. 'Think of your dream home as the destination – you can't get there if you don't know where you're starting.' Sarah Tucker, CEO of the financial advice firm The Mortgage Mum, urges younger people not to wait until they've saved for a deposit before seeking financial advice from mortgage brokers. 'There's nothing better than speaking to a professional, even if you're years away from buying.' READ SOURCE businessmayor May 10, 2025
Yahoo
09-04-2025
- Business
- Yahoo
Trump's trade war risks global financial crisis, Bank of England warns
The Bank of England has warned that Donald Trump's trade war leaves the world more exposed to a financial and economic crisis. A steep rise in global tariffs beginning at 5am on Wednesday 'had contributed to a material increase in the risks to global growth', according to the Bank's Financial Policy Committee (FPC), adding that tit-for-tat action risked 'harming financial stability'. 'The global risk environment has deteriorated, and uncertainty has intensified,' the committee warned. 'The probability of adverse events, and the potential severity of their impact, has risen.' The FPC, which is led by the Bank's Governor, Andrew Bailey, added: 'The risk of further sharp corrections remains high.' Policymakers also warned that renewed market turmoil raised the risk of countries falling into a debt spiral as governments struggle to escape a doom loop of low growth and rising borrowing costs. The FPC said: 'Risks associated with debt sustainability concerns, including sharp increases in government bond yields, could crystallise relatively quickly, particularly if accompanied by rapid capital outflows. Increased debt levels and servicing costs for governments as debt was refinanced could also reduce their capacity to respond to future shocks.' The US president's sweeping duties include a 104pc tariff on China, the world's second largest economy as well as levies of up to 50pc on other nations, including some of its biggest trading partners. The FPC warned that Mr Trump's actions would have severe implications for the global economy. Minutes of its latest meeting warned: 'A major shift in the nature and predictability of global trading arrangements could harm financial stability by depressing growth.' It warned that the outlook for inflation also remained uncertain, with many economists predicting the Trump administration's tariffs will push up prices and limit the ability of the US Federal Reserve to cushion a growth shock by cutting interest rates. The committee also warned that the UK was particularly exposed to financial shocks because of its open economy and large financial sector. Rachel Reeves, the Chancellor, said on Tuesday that she was in close contact with Mr Bailey about developments in financial markets and the economy. The Bank repeated a previous warning that high debt levels around the world had left countries vulnerable to financial shocks. It warned that banks should start to wargame for such events. 'Higher government bond yields would also increase the cost of borrowing and refinancing of debt for households and businesses,' it said Despite the market turmoil, the FPC said it believed that the British banking sector remained resilient with capital buffers that were big enough to withstand a major shock. Overall household debt levels have fallen to their lowest since the start of the millennium, it noted. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Yahoo
03-04-2025
- Business
- Yahoo
Will Trump's tariffs change Bank of England's interest rate plan?
The Bank of England (BoE) may be forced to reconsider its interest rate strategy following the latest escalation in the global trade war, triggered by US president Donald Trump's announcement of fresh import tariffs. The UK has been hit with a 10% tariff on all of its goods being brought into the US, which Trump says is a retaliation to UK tariffs on American goods. With global markets now facing the impact of these new tariffs, the BoE must navigate a delicate decision — continue cutting interest rates, or pause and wait for more clarity on how the situation with tariffs will unfold. investors are significantly increasing their bets on interest rate cuts by major central banks in an effort to stave off a potential global recession. On Thursday, investors piled on more expectations for a rate cut by the BoE, driven by concerns over the damage to trade and economic growth caused by Trump's tariff decision Futures markets suggest a reduction of approximately 60 basis points (bps) to the BoE's benchmark Bank Rate by December. This marks an increase from the 54 bps expected just a day earlier, effectively pricing in two quarter-point rate cuts. The likelihood of a rate cut in early May has also risen, now standing at 77%. The BoE's interest rate policy has far-reaching implications for UK households, influencing borrowing costs for mortgages, credit cards, and loans, while also boosting returns for savers. At present, UK interest rates sit at 4.5%. However, the central bank has been cautious about further cuts, citing growing global trade uncertainty as one of the reasons it refrained from reducing rates last month. Read more: How and when Trump's tariffs could impact UK inflation and consumer prices If prices are pushed up for long enough to affect the rate of inflation this could mean interest rates stay higher for longer. UK inflation has continued to stick above central bank target level of 2%, coming in at 2.8% in year to February, according to data released last week. Meanwhile, economic growth has been sluggish, with data showing a slight dip of 0.1% in January. Andrew Bailey, the Bank of England governor, said it was the Bank's job "to make sure that inflation stays low and stable" and that would be "looking very closely" at the impact of tariffs. Daniel Murray, deputy CIO & global head of research at Zurich-based global private banking group EFG, said: 'The risk of a US and global recession has increased directly as a result of the US tariffs, as has the likelihood that inflation stays higher for longer. In turn, the possibility of stagflation makes life very difficult for central banks.' Economists at the BoE have indicated that the full effect of the tariffs will depend on how other countries respond with their own trade policies, as well as how foreign exchange rates are impacted. Swati Dhingra, a member of the Bank's Monetary Policy Committee (MPC), suggested that the inflation impact could be 'less than feared'. She argued that the primary goods the US imports from the UK, such as refined oil, would likely see little price increase due to the new levies. Fellow MPC member Megan Greene also pointed out that tariffs could potentially be 'disinflationary,' as businesses in affected countries might shift trade to new international buyers, thereby mitigating the price pressures that could lead to inflation. Read more: FTSE 100 LIVE: Stocks nosedive after Trump's tariff announcements Some economists, however, warn that the tariffs could ignite inflationary pressures in the US, which may lead to higher interest rates for a longer period, potentially spilling over to affect the UK economy as well. Myron Jobson, a senior personal finance analyst at Interactive Investor, explained the broader implications for Britons: 'If tariffs contribute to higher inflation, central banks may be forced to tighten monetary policy, which can weigh on bonds and borrowing costs. This could impact everything from mortgage rates to corporate investment, potentially slowing economic growth." Earlier, in November, the Bank of England had signalled that inflation in the UK was largely under control, with expectations that interest rates would fall below 4% by the end of the year. However, with the latest developments, the BoE, like the US Federal Reserve, is adopting a more cautious approach to its inflation forecasts. Dan Coatsworth, investment analyst at AJ Bell, said: 'There is a strong chance that we see a pause in the current rate cutting cycle, particularly in the US and Europe. Central banks will be worried about rising inflation and that means rates could stay higher for longer. 'Most companies are reluctant to stomach lower profit margins so the end customer is the one who will suffer. They will have to pay higher prices and that means being more selective over what they buy. Some companies will see their sales fall because shoppers either can't afford it, they're delaying purchases or they've chosen something else. Read more: Pound rallies as dollar and oil prices drop after Trump's tariff announcement 'A pause in rate cuts is bad news for companies and consumers who are under financial pressure and struggling to pay off their debts. It is also bad news for anyone looking to get on the housing ladder and hoping mortgage rates would come down soon.' The pound has weakened significantly against the dollar, making imports from the US more expensive. British consumers may find themselves paying more for goods like machinery, transport equipment, and even vital products such as vitamins and antibiotics, as the US remains a key supplier of these items. Higher costs could be passed on to UK consumers, further adding to economic pressures. UK prime minister Keir Starmer admitted to business leaders at a meeting in Downing Street that 'there will be an economic impact from the decisions the US has taken'. He said he would only strike a deal with Trump's White House 'if it is in our national interest and if it is the right thing to do for the security of working people, protects the pound in their pocket that they have worked hard to earn'. He added: 'I want to be crystal clear: we are prepared, indeed one of the great strengths of this nation is our ability to keep a cool head.' Read more: Trump's tariffs could wipe out UK budget headroom, warns OBR Eurozone inflation falls to 2.2%, bolstering case for interest rate cuts Stocks: Create your watchlist and portfolioSign in to access your portfolio
The Independent
20-03-2025
- Business
- The Independent
What the latest interest rates mean for your mortgage, savings and bills
The Bank of England (BoE) have today announced a hold on the Bank Rate - what we might simply call the interest rate - at 4.5 per cent, keeping it the lowest it has been in the UK since mid-June 2023. Around that time, with inflation rising fast and the BoE seeking to stem it, the base rate jumped from 3.5 per cent at the start of February to 5.25 per cent by August - causing a sharp increase in mortgage repayments, a battle for savers among banks and plenty of other side effects. With both inflation and interest rates (generally, slowly) on the way back down, February saw the first decrease the BoE (or their Monetary Policy Committee, technically) have applied since November last year, amid an eventual government aim to stem inflation at two per cent. While it's important to know what it all means for people on a day-to-day basis, it's also kind of impossible to separate entirely individual financial situations to the overall economic picture of the country. So, with that in mind, here's a brief rundown of what has happened to lead us to an interest rate drop - and what it means for you. UK growth, Rachel Reeves and how it impacts base rates You may remember several negative headlines from the start of the year over Labour's policies and approach and the effect on the country from a monetary perspective. To distil down a very complex subject into a few sentences, one big argument was that the Budget from last year was not stimulating growth within the UK business sphere, while the additional costs - increases in wages and National Insurance contributions - were going to actively hamper them through financial pressures, jobs and needing to push price hikes. When data in January showed a 0.1 per cent growth in the economy (data for November, it's always trailing) it caused a surprise and was hailed as a 'step in the right direction', albeit a tiny one which needed to be quickened up. UK economic growth has been forecast at around one per cent for 2025, which is lower than previously expected and perhaps even showing stagnating growth, so an interest rate cut is seen as one way to stimulate spending and give the economy a kickstart. However, a recent slight decline mean recession fears are genuine. What's next for Ms. Reeves and it might affect you, read on here. For the more immediate interest rate-related impact, however... What does the interest rate mean for mortgages? Starting at the top, then. Broadly speaking, as increasing interest rates have meant mortgage repayments going up, then the reverse should also hold true: lower rates, lower repayments. However, there are several important things to note. Firstly, that it's only the interest on the repayments which should change - your capital repayments will naturally decrease the more you pay off your mortgage. Secondly, the base rate isn't the rate you are necessarily charged by your bank or lender for the mortgage - they'll base theirs off the BoE rate but it doesn't have to be the same. More than half a million people do, however, have a mortgage which tracks the BoE interest rate and those will see an immediate change. Far more have fixed term deals which expire each year and need renegotiating. Additionally, if you've got a fixed term on a mortgage plan, you won't see a change in any case until that comes to an end. What about savings accounts? If you have money in a savings account, it's the other side of the see-saw to mortgages: rates going down mean you'll earn less interest. As there's still a bit of a fierce battle raging among banks and building societies for customers, it's still possible to get good deals if you are happy to lock in money for a fixed period of time or contribute regular amounts, with several offering around five per cent or even considerably more. There are always terms and conditions to be met, so ensure it suits your circumstances, but the opportunity remains there to save and earn money at a better rate than inflation. Do be aware of the amount of interest you can earn without being taxed, though. If your savings account interest rate isn't fixed, naturally it could decrease now as the base rate goes down. Credit card repayments and bank or car loans are of course also affected by interest rates, as the amount they all charge for borrowing will be altered. For credit card users, it's always ideal to pay off the full amount each month if you are able to, to avoid interest being charged at all - depending on your circumstance and the account type, they can be one of the more costly ways to borrow. Again, it may not be immediate that lenders lower their rates after a base rate drop, but get in touch with them to assess your options if you feel your repayments could or should be lower. Anywhere else it impacts? Spending, primarily. Generally speaking, lower interest rates encourage people to spend more money (consumer confidence increases) and that in turn sees businesses generate more money, sees them pay better wages or hire more people, so in turn spending can increase around it goes in a virtuous circle. That's the idea, anyway. It's only a month or so since the complete opposite was being feared in the UK, with those aforementioned low growth rates and high borrowing costs for the government putting Ms. Reeves under pressure and having people worried about debt increasing, less public spending, fewer jobs, constricted wages and lower consumer confidence - a spiral in the unwanted direction. Away from that side of the economy, over the longer term interest rates can indirectly affect pensions too and how much they change, while for equities investments, a falling interest rate is generally seen as positive for stock markets because it costs less for businesses to borrow and to invest in new projects - but there's more at play here too, such as low growth rates hampering sales, upcoming increase in labour costs and potential Trump-shaped tariffs on the horizon. As well as predictions on future interest rate cuts! As you can see, it all ties in together in roundabout ways over and over again; slowing inflation and getting growth back on an upward trajectory remain big targets for those in charge. On a more day-to-day basis for people in the UK, the hope will be that ongoing lowered interest rates might cut costs in some quarters and ease spending in others, contributing to a healthier overall economy... and individual bank balances, maybe.
