I'm not sure a vague promise of a possible tax cut in 2 years time is going to help too many people, especially when you see what the OBR/ONS are saying...
Sadly I fear a lot of the population are gouing to be royally fucked in the next 12 months.
We have been walking a knife edge for a long time. A lot of households have been riding a debt carousel for years with crazy amounts of credit and lenders have been trying to find news ways to keep them ‘afloat’ with the latest thing being ‘buy now pay later’.
We’re now heading for the perfect storm where unsecured credit lenders will sit below a choice of paying a mortgage, paying for food, paying heating, paying for fuel to get to work and a rising rate of inflation and interest rates.
No-one will come out of this unscathed because even if you don’t have any credit or unsecured debt, the others will still bite.
Will we see a property crash like the 89/90? I think that depends. 89/90 was fuelled by a lot of people trying to move up the property ladder and selling their houses at the same time as an influx of people being unable to pay their mortgage due to rising inflation and interest rates and all trying to sell at the same time with a net result that the market became flooded and prices dropped like a stone.
The key difference between now and then is that there are a lot more properties owned by investors in buy to let who are less likely to panic sell BUT as an investor they are not going to rent at a loss (if the cost of the mortgage is more than the rent they receive) nor put up with a tenant who can’t pay their rent. Plus, it’s difficult to get back on the property ladder once you’re off it.
Right now I have a lot of ‘luxury’ direct debits that I am earmarking for belt tightening… sky, Netflix, Prime etc that I need to start prioritising because I simply can’t justify those over paying for the necessities. But even by removing all of those, I still don’t save enough to cover the cost of living increases we have endured in the last 12 months so I dread to think what households who are living ‘hand to mouth’ are currently doing to survive.
We joke about people prioritising the latest iPhone over buying food but, for a generation or more, people have had a constant line of credit that fuels the behaviour. By that I mean that I can be in the wierd position that I have no cash to do a weekly £50 shop and yet can walk into a phone shop and by a £1,200 phone for £75 a month with very little consideration by the lender as to whether I can afford it.
In short, the credit bubble is about to burst which will mean more people will need to save up to buy things at a time when they have no money to even pay their bills and people may see their property equity as a means to survive and either remortgage or, cash out by selling and moving back to rented in the hope the market does crash and rejoin when prices have dropped but that’s a massive risk in its own right...
