Bank Industry Insights: January 2024 edition

From 1 January 2024, the new European Sustainability Reporting Standards (ESRS) come into force. The extra territoriality of this regulation means that the new standards apply to EU and also to non-EU firms which meet the criteria. Ashurst's partners Anna-Marie Slot and Lorraine Johnston, along with counsel Becky Clissmann, have put together this useful briefing setting out what you need to know and how the ESRS may apply to your organisation. If you need further advice, please do reach out and we would be happy to help.

With the rates of inflation falling slightly quicker than expected as we closed out 2023, the question now is how and when to "ease the squeeze" on interest rates? Central banks in the US, UK and Europe generally accept that they will be able to bring down interest rates in 2024, but they will need to be careful so as not to lead to economies overheating, or more inflation. We may well be moving from 'higher for longer' to 'lower but slower'.

This seemingly aligns with the latest predictions, where the probability of a March rate cut has fallen in the eurozone (from roughly 65% to less than 50%) and in the US (from 100% to about 70%). The expectation that interest rates may not reduce quickly in the US (at least not within the first half of 2024), reflects figures from December 2023 which demonstrated a resilient job market and falling unemployment levels.

Another key question for 2024 is whether mortgage rates in the UK are likely to fall? Mortgage rates have eased in recent weeks, with the average 2-year fixed rate settling at 5.9%, down from a 15 year high (of 6.85%) last August. This decline looks set to continue in the coming weeks, given falling swap rates. Current forecasts suggest that the average 2-year fixed rate could be close to 4.5% by the end of this month. However, any further falls in mortgage rates will be determined by whether the Bank of England decides to lower interest rates in 2024 – the question remains; how fast or slow?