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This was in the Evening Standard the other night. Apologies if it's been posted before but I didn't see it.

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

There is something strange going on in London's clubbing world this spring. From the louche nocturnal haunts of St James's to the vast dance caverns of the suburbs, takings have fallen — and fallen dramatically.

The sudden downturn has already claimed one major London venue, Matter in Greenwich, while another, Fabric in Smithfield, is said to be in deep financial difficulties.

Club owners say they are baffled by the phenomenon, which they say started in early April, and does not seem to have affected the mainstream bar and restaurant scene. Yet.

But for some economic experts the nightclub no-show is a telling “canary”, warning of the strains finally starting to be felt in London's economy.

They point out that a night's clubbing is an expensive yet wholly discretionary luxury, costing typically £100 once cabs home have been paid for.

There are a few Londoners for whom it is a non-negotiable essential of life but probably not many. Most clubbers are young, in their teens and early twenties, the age group that has been worst hit by the rise in unemployment and the most likely to be pulling in their horns first.

So, having sailed through the worst recession in living memory apparently unscathed, is London finally about to feel the pinch? After The Great Escape, does the capital now face The Big Squeeze?

Certainly for most of us it was the recession that happened to someone else. Bizarrely, it left homeowners still in work much better off as huge chunks were lopped off their mortgage bills.

For those on interest-only mortgages the savings were truly mind-boggling. Payments were down by 80 per cent or more once the Bank of England's rate hit historic rock bottom of 0.5 per cent in March 2008.

With more money in people's pockets in London the party went on, like one of those New Orleans bars that defiantly keeps serving the daiquiris even while the hurricane rages.

But it could not last. Although London still rocks, a palpable chill is in the air, as the nightclub industry's problems attest.

Inflation is at a 19-year high, VAT and capital gains tax seem certain to go up in George Osborne's first Budget on June 22 and pay freezes are everywhere you look.

But worse, much worse, is the creeping realisation that the end of these balmy days of record low mortgage rates may be coming sooner than we think. While mortgage-laden Londoners gained most from falling interest rates, so they will hurt most when the worm turns.

Last week one of the world's leading economic forecasting bodies, the Organisation for Economic Co-operation and Development, sent a jolt through London's home-owning community with the starkest warning yet about the approaching end of the era of “free” mortgages.

It said that the Bank will have to start increasing its interest rate from 0.5 per cent in the autumn — that's in less than six months' time. By the end of next year the OECD forecasts it will have to rise to 3.5 per cent. Who's to say if its crystal ball-gazing is more accurate than anyone else's but the fact that rises are even being talked about is enough to worry many.

For Valerie Taylor, a 41-year-old mother of two from Acton, increases in rates on that scale would be a disaster. “I was on a fixed rate at 5.39 per cent until two years ago and I was paying nearly £2,000 a month. Now I'm on a variable deal at 2.39 per cent above the base rate and the bill has gone down by half to £1,025.

“I'm a freelance PR and my income has gone down by 60 per cent over the past two years, so the lower mortgage has saved me. If my mortgage rate goes back to where it was, it's going to be a real, real struggle for me.

“If it goes higher, then I'm going to have to parachute out of this house and move somewhere cheaper. We could only go on living here if we ate baked beans every day.

“If VAT goes up to 20 per cent as well, I think people would take to the streets — and I'd join them.”

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, 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.”

The OECD forecast was scary enough to send thousands of Londoners scrambling to reassess their personal finances. Rent-a-room agency Crashpadder, which helps home-owners find short-term tenants for their spare rooms, says enquiries leaped 300 per cent the day the report appeared. “We can find no other plausible reason for this increase in demand for our service,” says the company's founder Stephen Rapoport.

Another company, Marketgard, which offers insurance to householders against sharp rises in interest rates, says enquiries have increased tenfold in each of the past two months.

Chief executive Chris Taylor says: ”The world has suddenly woken up to interest rates again in the past few months. Last year we were getting almost no inbound calls but now people feel that things are not nearly as benign as some of the commentators would have us believe.”

According to the company's research, two-thirds of Londoners feel rates will rise in the next 12 months and 18 per cent think they will go up to at least three per cent.

Worryingly, 40 per cent say a rate rise will put a strain on their monthly finances and a further nine per cent think they won't be able to keep up their monthly repayments if rates rise.

Of course, not every City guru thinks interest rates are bound to rise soon. Roger Bootle of Capital Economics has forecast that the Bank of England will keep its rate at no more than one per cent for a further five years.

But as one adviser put it, “You need to think: Can I really afford to rely on Roger Bootle being right and everyone else being wrong?'”

Even before the Bank makes its long- awaited move there were signs last week that lenders are taking their own initiatives to raise mortgage rates from their record lows. Two of the biggest high street players, LloydsTSB and Cheltenham & Gloucester, said that their “default” mortgage rates for borrowers reaching the end of their fixed or tracker deals will go up from 2.5 per cent to 3.99 per cent.

The problem for Londoners is worse because house prices have remained extremely high, in some parts of the capital exceeding their 2007 peaks.

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 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.”

Debt counsellors say that Londoners face the toughest challenges in the country, in part because people have to stretch themselves to breaking point just to have a roof over their heads.

According to figures from the Consumer Credit Counselling Service (CCCS), the financial troubles of people who get themselves into debt in London are likely to be more severe than in any other part of the country. On average their monthly short-fall just to cover the basics of life is £54.

Not surprisingly the CCCS recommends that 15 per cent of the people it sees in London take the most extreme option — bankruptcy — more than in any other region except the South- West.

Chris Tapp, director of the Credit-Action charity, says: “If homeowners are asked to find an extra £100 or £200 a month on their mortgages, that is often wriggle room they just don't have. And it is enough to tip them over the edge, particularly if they have suffered a shock to their income. Nationally we are talking about tens of thousands of people in that situation.”

Of course, London is still, by any standards, a staggeringly wealthy, vibrant global city that sucks in billions of pounds of international money every year. It will take an economic cataclysm to bring it to its knees. But a metropolis where perhaps two million households have taken out mortgages to pay for some of the most expensive property on the planet is certainly not immune from the effects of the planned government cuts and potential interest rate rises.

Many will be praying that the OECD has got its numbers wrong. But if the OECD is even close to being right, it will be a lot more than just nightclubs feeling the pinch in the years to come.

Warning signs to watch out for

* An increase in VAT that would hit everyone. Some commentators forecast that the Government's first Budget on June 22 might raise VAT as high as 20 per cent.

* A rise in capital gains tax is also predicted in the Budget; bad news for anyone needing to cash in investments.

* A steady rise in interest rates, predicted to begin this autumn, would drive mortgage rates up again.

* A frozen pay packet, even though inflation is running at a 19-year high.

No Parma Ham. How will they cope?

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"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, 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."

47, paying rent, sure its low, but its rent all the same.....and that could be going up 7 fold if the OECD are correct..and he is struggling now.

the bank is losing money every month too.

course, anyone wanting to buy that place off him will need a 20% deposit and pay a rate probably 8 times what he is, and probably NOT IO.

saving these overstretched has kicked the can....whoever it was who was incharge thought it would save him in the election....it failed, and now we are all paying much more for the bill.

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No Parma Ham. How will they cope?

It's so funny isn't it. They really have no idea.

When your definition of hardship is being forced to choose a bad year of Dom Perignon, the next 10 years are going to seem like a trip to the depths of hell. On the brighter side, at least some of them might start to realise what's important and what isn't.

As for the clubs, I'll wager that there is an element of fashion at work here. There will be smaller, cheaper, cooler, 'underground' clubs taking some of the clientèle the big bloated superclubs used to rely upon. Same as it ever was.

Edited by redalert

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It's so funny isn't it. They really have no idea.

When your definition of hardship is being forced to choose a bad year of Dom Perignon, the next 10 years are going to seem like a trip to the depths of hell. On the brighter side, at least some of them might start to realise what's important and what isn't.

As for the clubs, I'll wager that there is an element of fashion at work here. There will be smaller, cheaper, cooler, 'underground' clubs taking some of the clientèle the big bloated superclubs used to rely upon. Same as it ever was.

Drugs are eating the London club scene alive (though both need each other). Basically these venue's exist to sell booze. Yet the clientelle will come chem'd up and drink tap water all night, so the owners are fighting a loosing battle with the pushers. Also I wonder now if online dating is having an effect. Clubs are not the only way to meet up for sex. But clubbing (in the centre) has always been an expensive proposition, especially due to the size of the place, and the taxi situation.

Edited by SirStirlingSlumlord

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

LOL! That's the way to run your financial affairs!

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ridiculous

a night clubbing costs 100 pounds? i thought you could buy pills for under a fiver :lol: , surely you wouldn't be looking at any more than 30-40 pounds max? guess if you go to these upmarket clubs they charge excessive entry fee.

it is no loss for these type of clubs to shut , the world is better off without them

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it is no loss for these type of clubs to shut , the world is better off without them

They are a product of the last boom, and it's only fitting that as the boom fades to dust, so should they.

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Drugs are eating the London club scene alive (though both need each other). Basically these venue's exist to sell booze. Yet the clientelle will come chem'd up and drink tap water all night, so the owners are fighting a loosing battle with the pushers.

Are you posting from 1987?

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Will be interesting to see if people "take to the streets" over VAT, I somehow doubt it. Surely if you are making a pile as a PR or in IT and have to pay a tiny mortgage you shovel as much money aside for a rainy day as possible? A lot of dummys obviously think the world and the government owes them a lifestyle?

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"..The OECD forecast was scary enough to send thousands of Londoners scrambling to reassess their personal finances. Rent-a-room agency Crashpadder, which helps home-owners find short-term tenants for their spare rooms, says enquiries leaped 300 per cent the day the report appeared. “We can find no other plausible reason for this increase in demand for our service,” says the company's founder Stephen Rapoport.

Another company, Marketgard, which offers insurance to householders against sharp rises in interest rates, says enquiries have increased tenfold in each of the past two months.

Chief executive Chris Taylor says: ”The world has suddenly woken up to interest rates again in the past few months. Last year we were getting almost no inbound calls but now people feel that things are not nearly as benign as some of the commentators would have us believe.”

According to the company's research, two-thirds of Londoners feel rates will rise in the next 12 months and 18 per cent think they will go up to at least three per cent.

Worryingly, 40 per cent say a rate rise will put a strain on their monthly finances and a further nine per cent think they won't be able to keep up their monthly repayments if rates rise."

What percentage of all mortgages were interest rate only (I/O) during the bubble years???

Must have been pretty high in London, which probably explains why HPC hasn't hit big time there yet.

Those 9% look vulnerable if the bank rate only goes from 0.5% to say 2% by end 2011 as expected. As they say, its the margins (in this case the 9% sub primers) who will decide the price.

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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 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.”

Boo f*cking hoo.

I guess since she's spent her entire adult life under Blairism she has no inkling that this behaviour isn't normal.

When people talk about killing the elderly because they're stealing from the young are these the young they're talking about?

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Boo f*cking hoo.

I guess since she's spent her entire adult life under Blairism she has no inkling that this behaviour isn't normal.

When people talk about killing the elderly because they're stealing from the young are these the young they're talking about?

Yes, and imagine having to holiday in this country. Such hardship is unthinkable.

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Boo f*cking hoo.

I guess since she's spent her entire adult life under Blairism she has no inkling that this behaviour isn't normal.

When people talk about killing the elderly because they're stealing from the young are these the young they're talking about?

She's buying a £220k flat in north London with her boyfriend and almost certainly with a large cash injection from older relatives. She is not a typical young person, she's a well-off one of the sort they like to write about in newspapers. The typical young person lives with their parents or in a shared rental.

However, she is part of the overleveraged chunk of the population that bought in or upsized significantly during the boom years and may live to regret it should IRs rise. Those people were FTBs now in their late 20s and 30s and 'forever home' buyers, BTL landlords and other MEWers in their 40s and 50s.

Edited by Dorkins

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Jodie Oliver, 31, who is buying her first flat with her boyfriend in Tufnell Park for £220,000 with a tracker mortgage

Buying a house with a "partner" is a bit of a risk. They can bugger off at any time .....

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No, idiots plan their live's around the 0.5% interest rate.

And exactly what percentage of mortgage holders are actually getting such rates? Surely he should have been massively paying down his capital so that when rates go back up he'd be much better off?

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Clubs ... I have never really understood the mindset around clubbing. Get drunk, randomly get off with people, the occasional fight, deafening music ... IMHO a bit hollow .... :mellow:.

Edited by Home_To_Roost

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Guest absolutezero

No, idiots plan their live's around the 0.5% interest rate.

You mean you've not noticed most people are idiots?

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This thread needs bumping

1) because that parma ham line is comedy gold

2) to post my avatar

3) I realise things will need to get like Monty Python's Yorkshiremen sketch before anyone thinks there's a problem

.

Edited by daiking

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Combination of low IR, IO and international buyers (£ down 20-30%, Greek/Russian/Asian buyers) seems to be keeping Prime London HPI going. As an example I've just found out that the neighbour of a friend has just sold his flat in zone 1 for £835k. My friend bought hers (identical, I joined her on viewings for for both) £610k last summer. Equates to annual HPI of 37% :o:o

There seems to be no limit to the madness in Zone 1 atm. :(

Edited by uncle_monty

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Drugs are eating the London club scene alive (though both need each other). Basically these venue's exist to sell booze. Yet the clientelle will come chem'd up and drink tap water all night, so the owners are fighting a loosing battle with the pushers. Also I wonder now if online dating is having an effect. Clubs are not the only way to meet up for sex. But clubbing (in the centre)  has always been an expensive proposition, especially due to the size of the place, and the taxi situation.

Heh when I worked as a chef the manager would hate the fact almost everybody would drink tap water, (it is illegal to charge for tap water btw). We simply were not making enough !

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This thread needs bumping

1) because that parma ham line is comedy gold

2) to post my avatar

3) I realise things will need to get like Monty Python's Yorkshiremen sketch before anyone thinks there's a problem

.

Young people these days don't know they're born

Many's the time I had to take a slice off our Doreen's ar*e to make a bacon sandwich....

Edited by council dweller

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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