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?

We will have to accept a simpler, less comfortable life with less reliance on cars and fewer choices in the supermarkets. Eating out will become a luxury, ditto foreign holidays and 24 hour central heating.

Well since our economy is now so weighted towards a service based ones that's not great.

We will have to accept a simpler, less comfortable life with less reliance on cars and fewer choices in the supermarkets. Eating out will become a luxury, ditto foreign holidays and 24 hour central heating

Why do l feel some people will enjoy this?

I can cope with simpler. Less comfortable sounds awful.

A lot of us are not going to survive this.

Hyperbole much?

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

It seems that a lot of people on this thread don't understand what a recession actually is.

[quote Bringsexyback]@Blossomtoes it absolutely did not happen late 80s and early 90s because I say I remember being an estate agent in 1994 at a property was advertised it was one of about three repossessions we had in the whole of Birmingham so not the enormous numbers that are people are trying to imply here. We received a cheeky offer something like 44,000 on our asking price of 47,000 and we were told no we could not except it by the Alliance & Leicester who were the sellers Because legally they had to re-coop as much of the owners money as possible[/quote]
The recovery had started in 1994 hadn't it. I thought the crash was 1989 to 1993 so what happened in 1994 isn't representative of the crash.

@Bringsexyback

I still do not see with the refugee crisis, with the lack of social housing, the government doing anything or allowing anything that would lead to mass homelessness of the indigenous population and if anybody finds in self in a situation where they are potentially falling behind in the mortgage payments, just pay something because then when you get in front of a judge, which you will, a human being will assess the situation and they don’t always come down on the side of the banks. As i say my ex-husband racked up a credit card bill and the judge just threw it out on a technicality. Again anecdotally ive been looking at houses that are in the first time buyer price range, most of them have been Landlords trying to offload their by to let portfolio but when talking to the Estate Agents looking round they have assumed that I am Landlord and I’ve been told that the property I’m looking at is currently rented out for between 950 and £1000 a month. the mortgage on the property would be £500 and I have to pay expensive rates of 3.4% because I’ve only just started a new job, most people buying at the moment I would imagine would be offered 1.9% fixed for at least two years which would take that mortgage down to under £400 in month, well you could pay that if you were on the dole. I do think there’s a few house price crashers on here living out their wet dreams that they’ve been hoping they’re going to come true since 2002 🙄

It won’t affect me personally if there was a house price crash or not. Apart from the fact that if there was a house price crash then the economy would be fucked and that would affect us all in many ways.

But you are been misleading telling people they can bung the odd £10 to the bank/building society to keep their house. That won’t happen. The bank would repossess and get the best possible price which market conditions dictates. If there are two bidders they take the highest price. If there are no offers, they’ll reduce the asking price until it sells.

@ThroughThickAndThin01 - renters have been known to be able to chuck the odd Tenner towards rent arrears and delay eviction for goodness sake you think a judge won’t offer homeowners that option too ? If it even gets that far.

I do think there’s a few house price crashers on here living out their wet dreams that they’ve been hoping they’re going to come true since 2002 🙄

If that was directed at me you couldn’t be more wrong. As @ThroughThickAndThin01 says, the economy would be completely trashed if it happened. I don’t want to see the value of my house go down any more than anyone else although we’d be far better off than most because we no longer have a mortgage.

I live in Dublin and I'm back at work 2 days per week. Last week I got a takeaway cappuccino for €3.40. I don't drink alcohol or smoke so this is my treat! Today I paid €3.40 for the same drink! I had to ask the fella serving me to repeat the price as I'm partially deaf and thought I'd heard wrong!!! Apparently inflation in Ireland us currently running at 5.6%. Just before the last recession I remember a taxi driver telling me that a lot of restaurants in Dublin would be closed soon. He was right and then everything just snowballed😭.

Repossessions and neg equity sales were more common because you used to be able to get 120% mortgages with no deposit and borrow 8x salary.
Today’s mortgage applications are stress tested to a rate of 4% above your rate.

The pointers according to the posters on here the absolute worst scenario was from 1989 to 1993, so providing we can all keep ourselves afloat for four years will be fine.

Given that most of us recently have taken a fixed rate mortgage is for at least two, in some cases five years that should see us through the worst of it.

Stop catastrophising it does not help anyone.

Yes lending was tightened up after 08 so fewer people should be in difficulty if there was a drop.

@lorking

I can't imagine interest rates in double figures, with the way house prices are there would be civil unrest

Interest rates will not hit double figures. The BoE will only raise the rate until inflation returns to 2%. The base rate is currently 0.5%, it probably won’t even get as high as 3% based on current expectations.

@PeachyPeachTrees

I thought we were in a recession and heading for a depression.

Nope. The economy has been growing for the past 4 quarters.

If modern mortgages are “stress tested” to 4% - how does that work when current inflation rates exceed that and are predicted higher? Also couple that with someone’s suggestion that if in difficulty “just pay the interest”. 🤦‍♀️

1% on your £500k is nothing, “just the 12% interest” on £500k is heart-stopping.

@Hollyhobbi

I live in Dublin and I'm back at work 2 days per week. Last week I got a takeaway cappuccino for €3.40. I don't drink alcohol or smoke so this is my treat! Today I paid €3.40 for the same drink! I had to ask the fella serving me to repeat the price as I'm partially deaf and thought I'd heard wrong!!! Apparently inflation in Ireland us currently running at 5.6%. Just before the last recession I remember a taxi driver telling me that a lot of restaurants in Dublin would be closed soon. He was right and then everything just snowballed😭.

I'm confused. It was the same price?

In response to the mortgage been the last thing to fall into arrears.
As someone who works in collections I can say that there are many people who choose to fund their car than pay their mortgage.
Or choose luxury shopping over paying their mortgage - image is a lot to some people and a house can take a long time to repossess. More important to have that Range Rover sat on the drive and the new designer wardrobe on show.

Once dealt with an account where the guy couldn’t pay his mortgage for the month but had a transaction to a holiday company on his bank account - asked him if he could get a refund on his holiday to enable him to pay the mortgage and he told me to go F myself and we will get our money when he has it.

Those talking about price drops and negative equity - does this only affect someone if they wish to sell/remortgage?

I fear a recession is unavoidable. Indeed, if you adjust GDP growth for inflation, it can be argued we have been in recession since 2008.

On your point about energy, things will get worse. Even after price hikes in April, the retail price of electricity and gas (what you pay) is still below the wholesale price (what your provider pays). This is the reason so many small providers went out of business. So, expect major increases in October.

Beyond that, spikes in oil prices often precede/trigger a recession, see chart. The grey vertical bars are recessions.

In the wider context, government finances are a disaster. For example, the US govt. pumped $6trillion into their economy over the last 2 years, yet GDP growth is still way below inflation.

Food/commodity prices across the board are spiking. See the chart for wheat. While they have come down in the last 24 hours, most market analysts expect prices to resume increasing. You can keep up to date by following this link - www.investing.com/commodities/real-time-futures

Also, you can follow me on twitter.com/mevbrown to keep up with some of the stuff the main stream media don't publish.

As they say: “forewarned is forearmed”...

@EdgeOfSeventeenAndThreeQuarter

If modern mortgages are “stress tested” to 4% - how does that work when current inflation rates exceed that and are predicted higher? Also couple that with someone’s suggestion that if in difficulty “just pay the interest”. 🤦‍♀️

1% on your £500k is nothing, “just the 12% interest” on £500k is heart-stopping.

The 4% is whether they could afford an extra 4 bps on the interest rate of the mortgage, not based on the inflation rate. Ie if the lender is considering offering them a mortgage at 2%, could they afford it at 6%. I can’t see the base rate going higher than 3%, most tracker mortgages are base rate + up to about 2%. So you wouldn’t be looking at people paying 12% interest.

I think its gonna be much much worse than a recession.

I can’t see the base rate going higher than 3%, most tracker mortgages are base rate + up to about 2%

I expect there were a lot of people saying similar things in 1979 - just before they went up to 17%.

We have been going through our finances and can just about shoulder the fuel increases and other increases if we cut back on lots of things, but those cuts we make will hurt other people. I normally have my hair done every 3 months, but will cut down to twice a year, but if all their clients halve their custom then it will be disaster for them. We normally have a takeaway once a month, but will only have one every few monthis now. Again - the takeaway will suffer as they are local family businesses and can’t afford the drop in trade. Ditto with our local deli, bookshop. It’s horrible how the ripples in the pond are spreading.

@Bringsexyback Please stop spreading misinformation on MN. If you think the government is going to step in and start paying mortgages or courts are going to let people off the hook from paying their mortgage debt, you’re just kidding yourself. The only way you’d be able to achieve this is to declare yourself bankrupt and that pretty much ensures you’ll never be able to get credit again in these times.

The Bank of England has already modelled that a 1% rise in interest will drop house prices by 20%. This information is actually publicly available. This is the reason they’re so desperate to avoid interest rate rises as the impact is significant.

However, they many soon not have a choice given how things are playing out. In the face of inflation at over 8%, no sane central government can keep interest rates low for long.

@olaamigo

Those talking about price drops and negative equity - does this only affect someone if they wish to sell/remortgage?

Yes. For example I have massively under borrowed on the house that I have just purchased and put down to 25% deposit on the basis that I am better off to do that than to rent for the two years it will take me to save up the 10% deposit on the house that I actually want so in the absolute worst case scenario that I need to sell that property there’s a 25% cushion anyway. And if my house has dropped by 25% then the next one up the ladder will have also dropped by 25% and that will work in my favour because obviously the pounds and pence are higher. The potential disaster is is that everybody gets to the end of the fixed rate mortgages and gets put onto the standard variable which they couldn’t afford in theory but if that happened the banks in my experience as a say it’s only anecdotally but they will move heaven and earth to avoid repossession they do not want the headache it cost them a fortune and there’s actually very little money made by them in the first five years of you holding that mortgage they want the long-term profit if you remaining in the property and paying interest over a 25 to 40 year period if they kick you out of that house you can’t get another mortgage for 12 years so you can imagine what that will do to their customer base. Combined with the fact that the government uses Debt as enslavement of the free if everybody is certainly posting back their keys to their house is why would they go to work ? Why would they pay tax and national insurance ? The carrot the government uses to make you drag your arse out of bed every morning is that you’re gonna improve your life a little tiny bit over and above those that sit on the dole and do nothing.

Quite a high % of home owners don't have mortgages though.