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?

@ledbydonkeys - governments have previously paid people‘s mortgage when I got made redundant in 2008 they actually paid my mortgage up to the rate of 6%…: my mortgage was actually only 3 1/2 so I made a profit on the government paying my mortgage. now I do appreciate things have changed more recently, And now the government loan that they pay to you to stop you being repossessed is added to the overall cost of the loan and re-payable but they will prevent mass repossession - all of this information is widely available on the Internet by the way if anybody needs to reassure themselves.

@ArseInTheCoOpWindow

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.

Yes, it’s almost as if some people are revelling in it.

@Bringsexyback

“ 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”

And here you go again. You also clearly don’t understand how mortgage amortisation works. The interest of the mortgage is actually front loaded so you for the first few years, the majority of what you pay goes towards paying off the interest and very little goes towards the actual repayment.

It's not looming, it's sitting on the sofa, wearing your slippers in its tightie whities saying Get me a beer.

I've lived through 2 recessions and my husband has a degree in economics and works in property sector he has no mentioned it and I remember in 2008 he wrnt on about it for 6 months before it happened

@ledbydonkeys - most people do not remain in the same property that they purchase at the beginning of their journey until the very end if you suddenly knock huge numbers of people off the ladder for a minimum of six years that’s a huge amount of customers that aren’t available to the banks who make their money by lending money.

When I say they don’t make money out of the first transaction for the first five years I mean they don’t make money out of the first five years of the life cycle of most people‘s journey of property ownership.

Anyway as I stated on other threads I’m not gonna continue to argue but I am gonna make the point that they do become self-fulfilling prophecies if you start saving money and shoving it all into low interest savings accounts or paying off mortgages on low interest rates your not gonna see a significant benefit but by not spending you are gonna literally cut your own throat‘s.

@Blossomtoes

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%.

Oh the pain, the memory is like a dagger. My saving grace was my youngest (at the time) started school in 1979 so I saved on nursery fees, not sure how we'd have survived otherwise.

@Blossomtoes

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%.

Conditions are very different to the 1970s. At the start of that decade the base rate was already around 5% whereas we have been at historical lows for years. And our economy is structured so differently now that you can't really compare the two periods. It's like comparing before and after the industrial revolution.

Anyway as I stated on other threads I’m not gonna continue to argue but I am gonna make the point that they do become self-fulfilling prophecies if you start saving money and shoving it all into low interest savings accounts or paying off mortgages on low interest rates your not gonna see a significant benefit but by not spending you are gonna literally cut your own throats

But this is normal behaviour in a recession. People spend less and save because they are scared.

Wondering if there is a north south divide here - I’ve just filled up tank with 1000 litres at £700 in north Yorks. Admittedly I did order a week ago.

Yeah, you keep telling yourself that @deadlanguage.

I genuinely think that the prices will not come back down. I believe they will all get us used to paying the higher prices eventually and keep them there. albeit in the guise of enviromental stratergies.

You can still get a 10 yr fixed rate for 1.92% so the markets are not predicting ultra high interest rates.

There will be some slowdown in discretionary spending though and I guess some adult kids will stay at home with parents even longer than they already do. Don’t blame em.

@MCLQC

You can still get a 10 yr fixed rate for 1.92% so the markets are not predicting ultra high interest rates.

There will be some slowdown in discretionary spending though and I guess some adult kids will stay at home with parents even longer than they already do. Don’t blame em.

The projected BOE base rate for end of 2023 is still 1.00%.

@Blossomtoes I work in financial risk so I can also listen to my colleagues telling me

And our economy is structured so differently now that you can't really compare the two periods. It's like comparing before and after the industrial revolution.

agree

Interest rates will rise to curb inflation and they will go as high as is necessary to do that. With huge cost of living rises people will be demanding higher pay and it doesn’t take much for wage/price inflation spiral to take off.

I think some people have never lived through high interest rates and just have no idea. I’d include some ‘experts’ in that. Not many experts saw the financial crash coming.

My God there is some utter irresponsible shite being talked about regarding mortgages and house repossessions on this thread. Take it from someone who has worked in the industry - do not piss around with banks. They will recoup their loan one way or another. If you get into arrears be proactive, contact them and work out a payment plan. Banks are businesses and ruthless ones at that.

My parents lost their house in the early 90's, I was an estate agent in the mid 2000s and the way lenders operate is drastically different now. The amount of young couples taking out 125% mortgages with Northern Rock, I dread to think what happened to them.

I fully expect a recession, the industry I'm in is stagnating and likely to contract over the next couple of quarters I think, we've been overpaying the mortgage regularly as I didn't like to think what prices would be at the end of our first 5 year fix (coming up to halfway through).

@Clarabe1 - come on then Clara share your industry knowledge what was your typical timeframe from first missed payment through to actually implementing and taking possession of a property ?

Piece in the Economist supporting the argument that it won't have nearly the same impact as previous oil price rises.

Different economic environment, different balance of where energy comes from. Negligible impact on inflation and much reduced impact overall.

www.economist.com/finance-and-economics/2022/03/12/how-oil-shocks-have-become-less-shocking How oil shocks have become less shocking from TheEconomist

The whole self fulfilling prophecy nonsense made me laugh. People aren't taking themselves into having lower expendable incomes.

"it's alright in London because of public transport"

Er wrong. £90 a week wouldn't cover my costs of £20 per day train fares.

Why does everyone always assume Londoners have the best deal? Commuting is awful for Londoners.

Yes, it’s almost as if some people are revelling in it.

Aren't they just? It's like the covid doom-mongers have had to find something else to doom-monger about.