To think a recession is looming?

[GrannyBloomers]

I was quoted £2 a litre for heating oil. £1000 for 500 litres, a matter of weeks ago it was roughly a quarter of the price.

Energy bills set to be £3k per annum - potentially more when a new price cap comes in in October.

Diesel near me is 171p and rising.

I'm in a 3 bed semi, nothing special. I need at least 1500 litres of oil a year (it runs the hot water too). That's say £3k. No gas but electric. I'm doing ok with cutting use = £1.5k per annum.

That's 4.5k at todays prices for household power. What will it be in October - 6k, 9k more?

This is before other costs increase - food will go up when the cost of storing it (refridgeration etc uses energy) and transport also increase.

If all the average person's income is spent on rent/mortgage/ bills and energy, then there's no money to spend on anything else. No eating out, no leisure, no holidays.

Surely a huge recession will follow.

And what if a much higher proportion of people need benefits?

@ancientgran I'm not sure why you think I don't understand that? My initial response was to a post which just talked about pensioners paying it. As you have said low incomes are price rises are hard, again this isn't just applicable to pensioners. It will be hard for most.

@BorgQueen the energy need for heat-source pumps sounds very alarming - when they were promoted, they didn’t take power cuts (as mentioned by national grid) and horrendous energy costs into consideration, did they?

Yabu because the UK has been in a recession since 2020.

If there's a crash and you can afford to sit it out until prices recover, it's really not a big deal. Prices recovered quickly after the 2008 crash, but the one that started at the end of the '80s took far, far longer - I think it was several years in many areas.

If you're selling and buying, the house you buy will be cheaper too. If you're moving to somewhere more expensive, you save more than you lose, iyswim.

This isn't the issue. People with mortgages who have no intention of moving lose their homes because of negative equity. If in negative equity you can't refinance at the end of a fixed rate arrangement on a similar one, and are placed on the SVR which is usually much higher. Hence repossessions.

@OakPine

In the mid 90s I sold my house for 60% of what I'd bought it for. I had no choice but to sell. Many people will have no choice but to sell. Shit happens. People die, get ill, get divorced, lose their job, need to move to another city.

There is no "handing back the keys". You are liable for the debt.

So if you bought for 300 and sell for 200:
If you have 200 left on the mortgage you are ok.
But if you still have 280 left on the mortgage, you get 200 from the sale and still owe your lender 80k.

It has happened before and could happen again. There is no "they" looking out for the housing market. No-one cares if it is fair or not. The market is the market.

I'm not saying this to be doom and gloom, but just as a warning to all the folks who think that the market never crashes. Pay off as much as you can, don't overpay for a property, stop renting huge cars, paying $$$ to get your hair and nails done/whatever else.

People have paid what they have to pay to have somewhere to live. They would have paid similar monthly anyway to rent and had no security, in many cases.

There was no third choice.

So wishing the misery of a housing price crash, and the long-term devastation it will cause for millions of families - as some posters have - is horrendous. And it's also massively misguided because as many have pointed out it benefits nobody, and bu the time that happens it means the whole economy is screwed.

I agree with you it could happen again, of course. But any Government would be very wise to do anything they can to avoid it.

AppleButter what horrendous energy prices for heat pumps? I've got one and it's pretty economical to run. I'm sure that the cost will rise as electricity prices do- but less than gas or oil are forecast to rise!

I do worry about power cuts, but we haven't had one in the 6 years I've lived here ( and we're in a rural area, vulnerable to storms)- and don't most modern gas or oil heating systems have electric ignition anyway?

Not saying that you were hoping for it @OakPine. But the PP who are must not really understand the implications and should read your posts.

@crackofdoom oh I didn’t know. Sounds much better then. I just read the bit where the electricity has to be on all the time and found it worrying. (It isn’t compared to what gas will be )

The electricity doesn't have to be on all the time. You set it to come on when you want it to, like most forms of heating, and according to what you've set your thermostat to, and then you can hear it click and start whirring quietly outside.

People talk a lot of nonsense about heat pumps, they really do 🙄

@TheSmallestGiraffe

If there's a crash and you can afford to sit it out until prices recover, it's really not a big deal. Prices recovered quickly after the 2008 crash, but the one that started at the end of the '80s took far, far longer - I think it was several years in many areas.

If you're selling and buying, the house you buy will be cheaper too. If you're moving to somewhere more expensive, you save more than you lose, iyswim.

This isn't the issue. People with mortgages who have no intention of moving lose their homes because of negative equity. If in negative equity you can't refinance at the end of a fixed rate arrangement on a similar one, and are placed on the SVR which is usually much higher. Hence repossessions.

We are now seeing 40-year fixed mortgages being introduced to the UK market (these are common in the US), so it will be possible to side step the refinancing problem.

So wishing the misery of a housing price crash, and the long-term devastation it will cause for millions of families - as some posters have - is horrendous. And it's also massively misguided because as many have pointed out it benefits nobody, and bu the time that happens it means the whole economy is screwed.

As a pp said for some it's easier to move up the ladder in a falling market.

Ever increasing house prices aren't a good thing either & what about the long term devastation of that? I'm a homeowner but I think it's ridiculous to call those who want a crash horrendous.

Only people who have never seen a crash in the housing market would desire it. The entire economy suffers.

The economy is not looking great despite high prices though?

quantitative easing, low interest rates, wage stagnation, asset inflation is why the economy is in a bad way.

What we have now is looking more and more like classic stagflation.

@lorking

So wishing the misery of a housing price crash, and the long-term devastation it will cause for millions of families - as some posters have - is horrendous. And it's also massively misguided because as many have pointed out it benefits nobody, and bu the time that happens it means the whole economy is screwed.

As a pp said for some it's easier to move up the ladder in a falling market.

Ever increasing house prices aren't a good thing either & what about the long term devastation of that? I'm a homeowner but I think it's ridiculous to call those who want a crash horrendous.

Not suggesting that either. Given what's happened with house prices for decades the only policy that makes sense is to basically try to keep them close to flat in nominal terms for a long time to inflate away the problem, while gradually make them cheaper for FTBs without totally collapsing the entire economy and leaving many families homeless and destitute.

We are now seeing 40-year fixed mortgages being introduced to the UK market (these are common in the US), so it will be possible to side step the refinancing problem.

Who is offering these?

I actually think the system in many European countries where you can fix for 20-30 years is much better in many ways. You buy the house and fix your payments for the entire time it will take to pay for it. It massively reduces worry over the economy and creates stability and also encourages people to view homes as homes, not investments, and care less about their current value.

I have never seen a mortgage fixed rate over more than 10 years advertised in the UK market though. Do you have a link?

I can't see how a recession isn't coming.

Ordinary workers are being hit hard.
The rich will be fine while the lower earners and poor will be screwed.

An air source heat pump requires electricity running 24/7 to power it

No, it really doesn't.

I thought we were in one. No joke.
Im a bit thick tho

What we have now is looking more and more like classic stagflation.

We've had that in my part of London for a while which is why the stamp duty/lockdown savings has allowed many who were stuck on the ladder to move.

For the most part the FTBs buyers are older & already earning well so it's much harder to build equity.

@Whammyyammy

I love MN, every time something happens there is going to be a recession and housing price crash, where we will all be buying 4 bed detached properties in the south for peanuts....brexit, covid, energy prices, war in Ukraine....🤣🤣

I don't think anyone is getting excited about buying houses for peanuts.

And in relation to the last part of your post: the point is that in just two years we've had an absolute perfect storm of factors, all of which - even in isolation - have had a significant impact on the cost of living. These aren't minor inconsequential events, and we're very much still discovering the full and true impact of all of them. That's what's happening now.

We were heading for a recession pre Covid and Covid and the terrible situation in Ukraine has simply exacerbated the economic problems.

The economy has been mismanaged for decades and more and more money was pumped in following the financial crisis and interest rates lowered to zero. These 'temporary measures' were never withdrawn and have led to greater and greater inequality and asset price inflation. Rishi throwing money around like a drunken sailor has made this worse. Unfortunately, the chickens are coming home to roost now. We already have stagflation and the official figures will show that we are in a recession before long. It seems likely that it will be a worldwide recession. It does seem v likely that asset prices will fall but when and by how much is impossible to predict. The central bank is stuck between a rock and a hard place with stagflation but it seems likely that they will have to raise interest rates small amounts.

I’ve been through 2 recessions the 80 - 90s was the worse one

My DH lost a house and flat and the shortfall on both places was around 35k I think

The both dropped around 15 -20k in value

He went bankrupt so never paid anything
Best thing he did as he was free of basically an unplayable debt and free to start again
He was lucky that he got a council flat in a really nice building as he had two young kids at that time

Roll on to now and bought the council flat and he’s got more property a excellent credit rating

But he’s very aware of how easy it can all come tumbling down

From people who have been through this before - is it likely that house prices will fall 40-50%? We have around that amount of equity in our home. Am I wrong in thinking that that will help us?