What next for the UK Economy - 2020/21 - Recession? House prices? Unemployment?

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LE
Book Reviewer
Torygraph

Four to 5pc inflation by the end of the year? That’s not something we have in our forecasts, Andrew Bailey, Governor of the Bank of England, said in a recent radio interview to mark his first, turbulent year in the job. In point of fact, it is, though admittedly it forms no part of the Bank’s central projection.
But it is very much in the Bank’s range of possibilities, and one moreover which in view of today’s extreme levels of uncertainty is judged rather more likely than normal. In its latest February forecasts, the Bank’s Monetary Policy Committee judged there to be a one in three chance of inflation being both below zero, and above 4pc by the end of this year.
We already know what the Bank plans to do if the former of these possibilities is the way it goes: impose a negative interest rate. Banks have been asked to prepare for just such an eventuality. Far less certain, however, is how it responds if inflation follows the latter trajectory. Does it come down hard on the rise in prices by increasing interest rates, or does it choose to treat the phenomenon as a temporary spike that can be safely ignored?

More to the point, can deeply indebted Britain actually afford a meaningful rise in interest rates? This is not just a question for the UK: the same can be asked of the world economy as a whole.
For illustrative purposes, let’s assume that the UK’s entire, £5.5 trillion (roughly 270pc of GDP) stock of public and private non-financial sector debt is linked to Bank Rate. A one percentage point rise in short-term rates would add £55bn to annual debt servicing costs. At 2.75pc of GDP, this would be a massive potential hit to demand. In the real world, of course, much of this debt is fixed rate, not variable. That lessens the impact somewhat. But only somewhat.
As the Office for Budget Responsibility has observed, the effect of extensive quantitative easing is to shift a great slab of the national debt from long-term fixed to short-term variable rates. For now, with Bank Rate at just 0.1pc, that’s extremely helpful to the Government, in that it can borrow with impunity at virtually no cost.
But it severely restricts the Bank of England’s ability to raise rates in future without severely damaging the public finances, never mind the impact on overgeared households and businesses.
None of this matters, of course, if there is no inflationary threat. Many of those warning of it tend to be the same people who were also sounding the alarm after the financial crisis more than a decade ago; their concerns were proved comprehensively wrong. Are they not crying wolf again? The US saltwater economist Paul Krugman has been unrelenting in his derision. The lesson of the 2010/11 crisis, he notes, is “don’t panic”; there will be no return to 1970s style stagflation.

Well, maybe, but as Andy Haldane, chief economist at the Bank of England, observed in a recent speech, the chances of it are a good deal higher this time around than last. Haldane is something of an outlier among policymakers on these matters, but there are lots of reasons for thinking he’s right. Let’s briefly count the ways.
For a start, there has been considerably more fiscal and monetary support this time around than last. Furthermore, it takes place against the backdrop of a very odd looking downturn which has nothing to do with the normal ups and downs of the business and credit cycles. Rather, it is an induced recession that will correct itself of its own accord the moment the pandemic is over. Any long-term scarring is therefore likely to prove relatively limited, with UK unemployment expected to peak at little more than 6pc, extraordinarily low by the standards of most recessions.
What is more, people have not been able to spend in the way they would normally, resulting in a large buildup of household and corporate savings.
At least some of this will get spent as the restrictions lift. Publicans and other businesses badly affected by lockdown are almost bound to raise their prices quite considerably in an effort to recoup losses. Starved for more than a year of the ability to spend, consumers won’t much care what it costs. They’ll pay almost anything for a pint in the pub. In time, these rising prices will pull earnings up behind them, threatening a classic inflationary spiral of rising price expectations and wages to match.

1/3 chance of negative rates.... 1/3 chance of 4%+ rates....


Basically they don't have a clue what is going on or what the likely trajectory is... Oh well I'm glad I'm not the only one.
 
1/3 chance of negative rates.... 1/3 chance of 4%+ rates....


Basically they don't have a clue what is going on or what the likely trajectory is... Oh well I'm glad I'm not the only one.
same here. Cant work out what's going on.

Just read Torygraph business and shoes and clothes are 1/10 of the price they were a year ago. Retail pricing for clothes has collapsed.

John Lewis exacting 70% of trading to go on line. 8 stores going and 1,500 jobs
 

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LE
Book Reviewer
And yet a pair of Churchs is still £750.

Loakes, Barkers and whatnot have some good reductions. I saw the same article so started plotting ways to spend my profits from the house. :)
 
And yet a pair of Churchs is still £750.

Loakes, Barkers and whatnot have some good reductions. I saw the same article so started plotting ways to spend my profits from the house. :)

You shop at the wrong shops. Its been a while since I got my last pair but I paid 180 sheets for my Churchs at the Church factory outlet at Bicester. I paid 100 sheets for a Hugo Boss black suite (no nordic runes on collar). I've never bloody worn it because of the pandemic. It's still hung up in the suit carrier they zipped it into. Cant see me waring the shoes again either for that matter.....
 
A mate's daughter works for a well known building society and was one of the society's top mortgage sellers in the country, at the end of last year she was pulled off mortgage sales and trained up for repossessions , she's already struggling to cope with the work load.
I have a question about this. I see that voluntary repossessions are on the rise. However they extended the legislation so that forced repossessions are prevented until 01 Apr 21 (next Thursday).
Will this make a difference? Are the banks basically sitting on a pile of cases waiting for the ban on evictions to lift?
Also there are currently over 4.5M people of furlough. When will this start to bite? or will it?
I just find the whole thing baffling, I thought at the very least it might become a buyers market but this feels like 2006.
I just phoned about another house but they have binned viewings, are just going to go for a 2 day open house. "shall I put you down for it?" is it a long list? "a bit", ok don't bother, in fairness we both laughed at that point.

Also my down valued prospect, they got their own independent valuation and he came in at asking price!
So are surveyors to be trusted no more?

I'm in 2 minds whether to press on or extend my current lease and sit tight.
 
I have a question about this. I see that voluntary repossessions are on the rise. However they extended the legislation so that forced repossessions are prevented until 01 Apr 21 (next Thursday).
Will this make a difference? Are the banks basically sitting on a pile of cases waiting for the ban on evictions to lift?
Also there are currently over 4.5M people of furlough. When will this start to bite? or will it?
I just find the whole thing baffling, I thought at the very least it might become a buyers market but this feels like 2006.
I just phoned about another house but they have binned viewings, are just going to go for a 2 day open house. "shall I put you down for it?" is it a long list? "a bit", ok don't bother, in fairness we both laughed at that point.

Also my down valued prospect, they got their own independent valuation and he came in at asking price!
So are surveyors to be trusted no more?

I'm in 2 minds whether to press on or extend my current lease and sit tight.
I have been sitting out for some time (3 years) as I though prices might drop, not much sign of it at the moment, however when the Stamp Duty exception ends who knows, as now it has just pushed up prices not helped first time buyers at all

I think the days of repossessions we saw in the past may not happen as banks and building societies will do all they can to stop it but who knows ?

I read in the papers recently - Housing Market too big to fail and Governments will do all they can to prevent a crash ?

Until interest rates go up I think house prices will continue to rise, Banks and Building societies will bend over backwards to lend money as the margins are just too thin to make a profit they have to go for volume

I had a flyer in the letterbox the other day - some one or organisation looking to pay cash for house and pay the legal fees or a £500 bonus if you give them a successful lead. I would be interested to know what their business model was.

Archie
 
I had a flyer in the letterbox the other day - some one or organisation looking to pay cash for house and pay the legal fees or a £500 bonus if you give them a successful lead. I would be interested to know what their business model was.

Archie
Think; We Buy Any Car but with houses.
 
I have a question about this. I see that voluntary repossessions are on the rise. However they extended the legislation so that forced repossessions are prevented until 01 Apr 21 (next Thursday).
Will this make a difference? Are the banks basically sitting on a pile of cases waiting for the ban on evictions to lift?

40 years ago, I was declined for a mortgage, even with a hefty deposit. ( Perhaps the bank manager did not like squaddies, or he knew other financial stuff that I did not )

With a face like thunder and ready to commit murder :) :) I bumped into a former school friend ( did not know she worked at the bank ) Her mother was in charge of repossessions.

A few conversations, a year later and my small business began its first baby steps - Repossessions for let. 3 properties bought for just under £16k.

Probably wont happen nowadays and would probably fall foul of some laws or other, Leslie's mother was an absolute star, even assisted in getting grants for property redevelopment ( Roofs, double glazing and central heating spring to mind )

The mindset then ( probably different today ) was that the bank did not want to be sitting on repossessed houses, money flowing in by way of mortgage payments or flog off.

A conversation over lunch with the correct bank employee would be £50 - 100 well spent and you never know, you might strike it lucky and get a star like I did.
 

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LE
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Seems the gubbermint is playing fast and loose with the figures...

So they reckon GDP dropped by 9.8% last year but.... That includes all money spent on health, education, local councils and the like.

Trouble is these have no price attached to them... If you are paying people to do nothing then it still adds to the country's GDP. There is no lnk to actual productivity.

I doubt anyone's council tax bill is going to come down, even though many of the services it pays for are not available.

Haven't seen much on repossessions... Except some vague estimates that 100,000 are likely. Also 800,000 or so tenants.
 
Council tax has gone up here. A noticeable amount.

I have written to my Councillor asking when they are going back to the pre covid bin collection pattern, as 4 weeks for the glass/plastic/tins is too long an interval and is causing people to throw away recyclables....that they have just spent a fortune on an ad campaign about...
 
Council tax has gone up here. A noticeable amount.

I have written to my Councillor asking when they are going back to the pre covid bin collection pattern, as 4 weeks for the glass/plastic/tins is too long an interval and is causing people to throw away recyclables....that they have just spent a fortune on an ad campaign about...

The council tax here in Dorset is getting out of hand, frankly.

My bill for a band C - two bed end of terrace - is now £2017 a year, and is becoming a considerable monthly bill.

The government contribution has gone down over-all by 60 per cent in the last few years and we, an overwhelmingly rural county (Bournemouth, Poole and Christchurch are a completely separate entity) now have the highest CT bill in Britain bar Rutland.

The really big expenditure is adult social care with the council being rinsed something wicked by private providers.

The bin bill works out at about£80 per household annually which is about the only visible service any of us get.

Not sure what the police do because we never see them,
 
The council tax here in Dorset is getting out of hand, frankly.

My bill for a band C - two bed end of terrace - is now £2017 a year, and is becoming a considerable monthly bill.

The government contribution has gone down over-all by 60 per cent in the last few years and we, an overwhelmingly rural county (Bournemouth, Poole and Christchurch are a completely separate entity) now have the highest CT bill in Britain bar Rutland.

The really big expenditure is adult social care with the council being rinsed something wicked by private providers.

The bin bill works out at about£80 per household annually which is about the only visible service any of us get.

Not sure what the police do because we never see them,

Count yourself lucky, I am £2238 p/a, 2 bedroom flat in Aberdeen, plus an extra £30 p/a to get the brown bins (garden waste) emptied. Band F though, different rating system up here perhaps?

I would expect rural counties to have a higher personal cost though - cost of getting around plus lower offset costs from industry perhaps?
 
Count yourself lucky, I am £2238 p/a, 2 bedroom flat in Aberdeen, plus an extra £30 p/a to get the brown bins (garden waste) emptied. Band F though, different rating system up here perhaps?

I would expect rural counties to have a higher personal cost though - cost of getting around plus lower offset costs from industry perhaps?
In a flat?
 
Count yourself lucky, I am £2238 p/a, 2 bedroom flat in Aberdeen, plus an extra £30 p/a to get the brown bins (garden waste) emptied. Band F though, different rating system up here perhaps?

I would expect rural counties to have a higher personal cost though - cost of getting around plus lower offset costs from industry perhaps?

we pay £3200 in rural Herts and we have to pay £15 a month for the brown bin. All we get for our cash is the bins emptied. The roads resemble the Somme.
 
we pay £3200 in rural Herts and we have to pay £15 a month for the brown bin. All we get for our cash is the bins emptied. The roads resemble the Somme.

Councils have got to pay for their pension deficits somehow, and it's ratepayers that suffer
 

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