Is London ready for the Big Squeeze?

carolt · 2 June 2010 at 7:46PM

Unintentionally hilarious article on the expected recession due to hit London over the next few months, caused esp by rises in interest rates, which - according to the article - many in London were apparently unprepared for and not expecting:

http://www.thisislondon.co.uk/standard/article-23840472-is-london-ready-for-the-big-squeeze.do

I say hilarious as it reads spookily like this Daily Mash article from a couple of weeks back - v funny if you missed it then:

http://www.thedailymash.co.uk/news/society/tax-hit-middle-class-threatens-widespread-passive%11aggression-201005172736/

My favourite bits from today's article (not the Daily Mash one, though you can hardly tell them apart) are:

"Another London homeowner, IT consultant and part-time teacher Gordon Crosby, 47, of Crouch End, says the fall in his interest-only mortgage, from £1,160 to £200 a month, :eek: has allowed him to completely rethink his lifestyle. “I'm self-employed and it meant I didn't have to earn so much so I could take on a lot more teaching work, which is poorly paid but something I love and feel is socially useful. Now I might have to get a proper job again.

“When I saw the article about the OECD forecast I turned the page and hoped it would go away.

I am alarmed. Surely the Bank will keep the rate low long enough for people to sort out their finances? The trouble is people now plan their life and their income around a 0.5 per cent interest rate.”

...

Jodie Oliver, 31, who is buying her first flat with her boyfriend in Tufnell Park for £220,000 with a tracker mortgage, says the purchase already feels like a huge leap into the dark without the added worry of rising interest rates.

She says: ”We've already given up nice little treats like vine tomatoes, freshly squeezed orange juice and Parma ham. We've stretched ourselves,

all our savings have gone into this and if rates go up more than two per cent we'll find it difficult. It will mean only going out to dinner once a week :eek: instead of two or three times and we will have to start saying no to going out to dinner with friends when they ask. Holidays abroad will be out of the question.”"

treliac · 2 June 2010 at 8:27PM

Good lord.... I suppose people really are that foolish. Current low rates are supposed to help people get out of difficulty. Looks like they're the instrument of entrapment for those who've designed their lifestyles around a short term blip.

Doctor_Gloom · 2 June 2010 at 8:37PM

carolt wrote: »

Unintentionally hilarious article on the expected recession due to hit London over the next few months, caused esp by rises in interest rates, which - according to the article - many in London were apparently unprepared for and not expecting:

I could well believe it Carol. Already, in the part of London in which I live, prices has been dropping steadily for several months. I suspect this is merely the beginning of something rather significant.

jonewer · 2 June 2010 at 8:41PM

On a different note, but also some how similar, a fried of ours came back from a 3 year stint in Singapore recently and was shocked when one day he realised he had to cut his own toenails as he couldnt afford a weekly pedicure......

carolt · 2 June 2010 at 8:42PM

That made me laugh, jonewer!

brit1234 · 2 June 2010 at 9:32PM

Prices are coming down here in West London.

Why do people push themselves to the limit at 0.5% interest rates. It is crazy, you have to have a safety buffer put in so you can still live a normal life.

Bring on the interest rate rises I say.

new_home_owner_3 · 2 June 2010 at 10:06PM

brit1234 wrote: »

Prices are coming down here in West London.

Why do people push themselves to the limit at 0.5% interest rates. It is crazy, you have to have a safety buffer put in so you can still live a normal life.

Bring on the interest rate rises I say.

Hey britt remember this the price is right come on down lol:rotfl:

http://www.youtube.com/watch?v=0Wni7vLv8Eo

Dirk_Rambo · 2 June 2010 at 10:20PM

I have a cousin who lives in London. She's been trying to sell her flat for the last 18 months and its no go even though she's dropped the asking price 2 times, the market is stone dead

Loopgames · 3 June 2010 at 3:03AM

Wow, that is shockingly hilarious! Very worrying really that some people have lost the foresight to save for the all important rainy day- or in this case - rainy dayssss.

Let me guess - now that they know this they will continue to ignore the warning of higher interest rates? I hope people start to head the warning and take control of their finances in view of this possibility.

I still go by the thinking that the current calm in the economy is superficial and that as soon as the interest rates rise or any other rise like VAT will reveal quite quickly how precarious everything is. The BTL market will suffer more losses as well. A lot of landlords go on interest only mortgages to increase their monthly cashflow giving them no margin to pay back a reasonable amount of the loan during low interest rate times.

There is a catch 22 here too..whilst mortgages are cheaper now...buyers have a bit of a problem...they are hesitant to buy due to the uncertainty in the market but may never get the opportunity to get such a low interest rate again for a few years and yet if they do buy they may be in negative equity within 12 months or sooner. Precarious times.

wymondham · 3 June 2010 at 4:44AM

It highlights an interesting point that people are indeed planning their financial future around the exceptionally low rates. I do hope people also plan for a rise, as it can't go lower or stay like this indefinately..........