To ask what recession is like and is there any way to prepare?

[sunfloweryy]

Just that really.

I was in my teens for the last one and both my parents were in secure jobs and houses so nothing really changed for me. I barely even registered anything was going on.

Now I’m 27 and bought a house a few years ago with my DH. We were hoping to TTC and upsize next year and have been saving.

I have been reading lots on here that we are likely to go into a recession as a result of all this and I’m starting to feel anxious.

Just interested in people’s experiences of what things might be like on a personal level and if there is anything we can do to prepare ourselves or make it easier?

I agree with a pp about the advantage of growing up poor when facing into something like this. It helps you focus on, and appreciate the most important things. A good attitude is a help because you can make yourself more miserable than you need to be.

Start reading the financial and business news, and the property reports. It can take a while to get your head into it, so in the beginning just read a bit every day but don’t worry about understanding it all. That will come.

Don’t look at what you can’t have. It really helps curb the desire to have what you can’t afford. Instead focus on positive frugalism - minimalism, zero waste, sustainability. As others have suggested cultivate a flexible attitude, especially to earning. Taking in a lodger, or taking a pay cut isn’t an issue of pride. It’s savvy survivalism.

Mortgage fixed for 2 more years so will probably need new deal in the midst of high rates 😫

I think 2 years time will be before the midst of high rates, tbh.

I remember a colleague getting a mortgage at 8% in the mid-70s. People told her she was mad, but a few years later, her 8% was a bloody good deal. I got a remortgage in the late 80s, at 11%. Two years later, it had shot up and you struggled to get 14%.

The cost of getting the economy running again after this, and getting back the money that has been spent protecting incomes and businesses, is going to be huge and will affect all the western economies. What that means for tax rates and interest rates is hard to fathom and I don't think economists agree. The usual thing of low interest rates to stimulate the economy and higher ones to prevent it overheating may well not apply.

Op l am much much older than you and have been through a few bad economic times, my advice is,

Pay off all debt ( not including mortgage here) as fast as possible and build a secure savings fund. Save,Save,Save.
Do example budgets showing different scenarios, ie if you lost your job or DH lost his jo, see if you can cover your costs, both now, and if you were on maternity leave.
Then factor in childcare options, see where that would leave your finances.
This will decide if you can TTC now or not. ( Admittedly it is not a great time l am afraid from a medical point of view.)

Then look at the house option.

If you delay TTC for a few years, you may be able to upsize now, there will be great buying opportunities, and mortgage rates are low.

Note, as you will want security to start a family later consider a very long fixed rate (10 years) to give you certainty of outgoings. This is probably the best time in my lifetime to do this, as rates are so very low and will not stay this way for ever so securing a rate for a long time makes sense.

Next look at emergency planning, if you upsize home and find youself struggling what can you do to bring in income? Spare room for lodger? Side business self employed? look at all options... proof reading £15- £20 per hour from home freelance/computer based marketing.....Before you TTC get different skill sets, take short courses in things that you can do self employed.

An example, an old neighbour of mine trained as a hairdresser on leaving school, then after 2 years went to uni and did a business degree and went into finance.
She was a casualty of the 2008 crisis and lost her well paid job overnight as did her DH.

No body was hiring in the city, so she started hairdressing at home in a spare room, and freelancing, within weeks she was very busy and said it paid the mortgage and bills until her DH found another role over a year later. Oddly enough she has continued and said she earns 35-40K a year plus tips on her own terms.

Not saying you should train as a hairdresser, but consider self employed skills as a back up, and to maybe work around future Dcs.

@Theyweretheworstoftimes, thank you for posting that link. It's very eye-opening.

I hadn't actually considered the possible impact of the pandemic on the supply side, I'd only thought about the effects of a contraction in demand.

I need to go away and press my reset button now, it was quite a paradigm shift.

Finshed College in May 2008, was one of the lucky ones in my class to get a job however made redundant in 2010. My partner a self emaployed builder had no work, had to let all his staff go. Got a job after redundancy however two hour commute, paying 25k (partner went to see if he was entitled to social welfare and we were means tested, he was told he was entitled to 10e a week :(), survived it for a year, then managed to get a job nearer home however less money. Really cut back, No holidays for 5 years. Remember going around aldi with a calculator adding up so we had enough money by time to checkout. Oil and fue prices sky rocketed we had weeks with no heating, also making do with appliances etc Didnt change the car for 7 years, Partner managed to get work however again with long commute. We were exhausted every weekend. Friends and family left the country, Austrailia and Canada. Some have ever come back . Shops closed down, friends went into negataive equity, Mortgagae went from a few hundred to over 1,000 a month. Sold what i coud on ebay etc. I never want to live through it again. Our carreers are only getting back on track, we have been able to change our car and take holidays and have a bit of a life, saved to get married this year too. I am dreading what this recession will bring, lucky i have a good job, but still it will be a struggle i think. Make sure you have savings and no debt

House was in negative equity, sold at a loss took a while to pay that off then had to start all over again.

Thankfully we had stable jobs but the one in 2008 meant that our property was in negative equity of around £40-50k for years.
We had 2 children during this time and were desperate to move as it only had 2 bedrooms.

Thankfully we rode it out, the economy improved and we made a lot of money from our house 4 years ago enabling us to move.

@Sharkyfan If you divided off the annexe can you reasonably afford to stay in the house? You have to allow reletting time when you won't get any rent and maintenance.
Rents can go down, but it is not automatic. It really depends where you live and how that area is impacted.
You could ask an estate agent to value your home. Rule of thumb is three valuations and pick the middle one, this tends to be more realistic. Knowing what you could sell it for gives you information to make decisions.

Last recession did not really affect me, one before caused me to be in poverty for quite a few years. Not everyone is affected in a recession. Some will still be fine.
Also some older companies will fold. But there are always new companies that start that see a gap in the market. So we may get the resurgence of zero waste stores again selling dry foods cheaply. These used to be really popular at one time, but most folded once the economy recovered.

I too am worried about a recession. My husband is in the oil industry that’s going to take a hammering although he thinks he will be one of the last to go if his work closes (he isn’t offshore so doesn’t earn that sort of money) I am a foster carer so I know my wage is going to be okay but it’s not enough and what we will get if my husband does lose his job is only about £500 ish a month in UC according to the online calculator.

I have absolutely no idea how we will manage. We only have a small amount of savings, but our mortgage has only about £10,000 left.

I’m lucky that we have never been affected by a recession before, but I think this recession isn’t going to be like anything anyone has ever seen before.

We had it very hard last time during the recession, we had just bought our house at top price that lost £20-30k straight away. Our mortgage was at a higher interest rate and was double what we are currently paying. DH lost his job and I went full time to pick up more income. He started a business which cost us more money than brought in. We were lucky in that we had savings and mortgage redundancy cover. By 2010, we had no savings and thousands of CC debt. DH had to abandon his business and get a job, paying about 18k just to get some regular income. It was really hard and took us about 5yrs to recover financially, DH retrained where he is and was promoted.

Would we be ok down sizing in a recession.
I guess our house would lose value and could take an age to sell. Did upper end of the market houses sit around for ages not selling in previous downturns?

To your first question, you will be among many doing the same. If downsizing is your plan, possibly better to do it sooner, rather than later. Even if price falls are equal across all price bands, a £500k house losing 50% of its value falls by £250k, a £200k house by only £100k. The money left over from the purchase won't fall by as much.

And to the second question: houses in all price ranges hung around for ages. There are huge regional, and more local, variations. If you live somewhere where there are lots of (relatively) secure public sector jobs, prices may not drop as far, if you're in Sunderland, they may fall further.

As a general rule, the places where prices shot up the most also suffered bigger falls. The house I bought in Sussex in 1993 didn't fall as much as the one I sold in Croydon, and is now worth more than the Croydon house. At the peak of prices, the Croydon house was worth more. At the time I bought and sold, the values were almost identical.

No @alloutoffucks it would help in the mean time but it wouldn’t solve it I don’t think. Would go towards our big bills but then of course would also increase our costs slightly eg electric, and we’d have to spend some money sprucing it up.
I was already thinking before all this whether we should move as we were/are not succeeding to stay in the black each month. That was before a 20% drop in income - definite from next month - and a potential 85% drop in income if my dh loses his job. Though I might possibly be able to work some additional hours. I think possible rental for the annex would be about 10% current income, maybe bit less.

Its going to be utterly horrific, and all make the actual virus itself seem like a pleasant stroll in the park.

The most concerning thing for me is the millions and millions of people (disproportionately children) who will die in the developing world due to famine, civil war and all the other horrors coming their way when the international development aid they currently receive dries up.

Meanwhile at home, my generation is very unlikely to have state funded retirement and I'm pretty sure that my DC generation won't either.

The repercussions of the lockdown will reverberate across the globe for many years (I think at lest a century) - long after all the lives 'saved' have died of something else within a few years anyway.

We'll look back on this time and wonder what on earth we were thinking.

we are thinking 'let's not kill lots of people and have so many out of action that our society collapses, so we get a real apocalypse with no power/water/comms/law enforcement/medicine'.

sometimes it is a choice between shit and really shit.

You will only loose money on property if you sell at a loss. You house is only with what someone will pay for it at any given time. It's value only matter when you want to sell or remortgage.

Interest rates have been low for ten years, they may go up, but the Bank of England won't push them up further than than people can afford. They don't want millions loosing homes. High interest rates make debt expensive. The government has just agreed a huge bailout package for business with an interest and fee free period. It won't do that and then raise rates as businesses will then fail after they have been given a lifeline.

We may have a very carefully managed recession. If rates increase people stop spending so rate rises will be carefully managed.

The actual figures demonstrate unequivocally that this is a disease of the elderly.

It's understandable that lots of people don't understand this, due to the hysterical manner in which cases involving younger people are being reported.

There is no threat at all to civil society.

I agree that it is a case of shit or shitter, but there is a choice between shit right now, or shit for the next 100 years, with all the 'saved' people dead anyway.

its ugly, for sure, but an uncomfortable truth.

We may have a very carefully managed recession

Good heavens, I don't wish to sound rude but seriously, what planet are you living on?

It is going to be literally the worst thing any of us could ever imagine.

For individuals, The biggest recession consequences come from losing your job and then not being able to secure another one. Prior to the 2008 recession it was easy peasy to leave a job and get another the next day. That changed overnight, and hasn’t really reverted to the pre 2008 position in the intervening period

The unemployment rate arising from the '08 recession peaked at around 8%. In the early 80s, it peaked at over 12%. I think it was over 20% in the Great Depression of the 1930s.

In the early 80s, inflation, public spending cuts and changes in manufacturing led to high unemployment and reduced demand, which triggered the recession. At the end of the 80s/early 90s, high interest rates reduced demand, caused the house price crash, repossessions and recession, and unemployment rose towards the end of it. The contraction in demand came much later than earlier in the decade.
And the 2008 recession also had its highest unemployment towards the end.

All recessions are different and usually multi-factorial. This one is very different, with both demand and supply contracting and huge uncertainty because there's no comparable history to look at. We've never had to basically shut down the whole world before.

That makes it massively unpredictable.

@Sharkyfan If you are already struggling to be in the black then yes it does sound like you need to sell. Good luck.

DH used to be in a secure industry (banking) until a few months ago he made a big career change into the public sector. I’m public sector too so I guess we have to hope the government don’t make cuts or we are both at risk

The public sector covers a multitude of jobs but, given that it has been cut to the bone since 2010, and that the importance of the services it delivers has really been brought home to people by this crisis, I think it would be electoral suicide for any government to make further cuts now.

People catastrophise a lot. A recession does mean society will collapse. And no it won't be like the Great Depression where people starved.
It will mean more unemployed and on very low incomes, that any industry with discretionary spending, except those catering to super rich, will suffer. Some people will have to sell their houses and buy smaller houses or rent.
It will be hard for a lot of people. But society will not collapse and the economy will recover.
Many economists had said that we were overdue a recession anyway.

A recession does NOT mean society will collapse.

no, a recession does not mean society will collapse. Not taking severe measures in a pandemic will do it though.

normal situation on MN, I see.

no, a recession does not mean society will collapse. Not taking severe measures in a pandemic will do it though

It pains me to say it, but unfortunately the opposite of this is true.

If we had taken the other extreme, letting the virus spread freely and people taking their chances, in 100 years' time, the economy would be in far better shape than before.

The deaths of the elderly and infirm would redistribute wealth in a far more equitable way (at the moment, wealth is concentrated in the hands of the over 60s)

Furthermore, the adult social care crisis that is due to his us anytime now would just disappear.

I'm not suggesting that we should have taken this opposite extreme, but it is the shutdown of the economy that will do the most long-lasting damage.