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Unemployment, repossessions and HPC


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Everyone knows there is going to be a huge surge in unemployment over the next few months, and a medium term shrinking of the work force, but this ain’t 1991, so we won’t see a wave of repossessions. The banks will bend over backwards before kicking people out of their homes, and the government will concoct schemes to help them...we will foot the bill, as always. I think there will be less forbearance in the BTL and second home market, and considering how big this is, could have significant impact, but is it enough to bring on 20%+ drops?

For me I am envisaging a slow grind down. While people who are unemployed may become zombie households who are able to stay put, they won’t be trading up. This will have a drip drip effect on those selling higher up the ladder, but it will be slow. Only forced sellers, probate sales or ageing boomers will give up their precious unearned equity. 

It would be good to hear from insiders how the banks are planning to deal with mortgage defaults and arrears.

Edited by HovelinHove
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I'm sure the banks will be praying the government can assist in some way. The saying privatise the profits and nationalise the losses is true and certainly has been the saviour of western capitalism for many years now.

If (when!) banks do find themselves in a bad state through a crash and subsequent mortgage defaults then I'm keen on seeing the public reaction and government justification if we get a 2008 with a nationalisation or two having to happen. Could be the straw that finally wakes up the perpetually-slumbered UK populace. Can't say I've ever viewed these bank 'stress tests' as anything other than a smoke screen in recent times.

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6 minutes ago, PaulTW said:

. Can't say I've ever viewed these bank 'stress tests' as anything other than a smoke screen in recent times.

Covid19 is a broad spectrum economic stress test.

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According to the OECD the outlook for the UK unemployment figures, currently at 3.9% are truly awful (https://www.theguardian.com/business/2020/jul/07/uk-jobless-rate-coronavirus-oecd-unemployment).

  • No second wave of Covid-19, the UK’s unemployment rate is likely to rise to 11.7% by the end of the year
  • A second wave of Covid-19, the UK’s unemployment rate is likely to rise to 14.8% by the end of the year

For comparison the previous peak for unemployment in 1984 was at 11.9% and the current UK unemployment rate is 3.9%.

The furlough scheme has failed to save almost 2/3 of a million jobs so far and starts to unwind as of the 1st August when employers have to start paying ER NICs and pension contributions in addition to the governments 80% of wages up to £2,500. This employer contribution will increase to 10% of wages in September and then 20% in October.

So unless they change the rules on how and when furlough ends we will see rapidly rising unemployment starting in about a fortnight.

To this add the fact that the debt to income in this country is over 140% per household (https://data.oecd.org/united-kingdom.htm), including an average credit card debt of almost £8,000 per household, with 48% of households having less than £1,500 in savings  (https://themoneycharity.org.uk/media/Feb-2019-Money-Statistics.pdf). A sizeable proportion of people in this country will be simply unable to stay afloat beyond a month if a household member losses their job.

With figures like that I don't see any option but  MASSIVE government intervention and if anyone thinks debt forbearance is likely, I would remind them what banks do when bailed out .... 

image.png.958ae2ca1891fceb3d1a39effb3c2a4d.png

 

Edited by Switch625
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A point to note if you rent, are a saver, and lose YOUR job.

You are also about to suffer repossession.

Your savings will be repossessed on a monthly basis, as your savings will be used to pay your rent, and pay for your upkeep. Savers are punished, you'll receive no JSA, and no support to pay your rent.

You'd have been better off enjoying it down the pub when you had the chance!

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2 minutes ago, Blink said:

A point to note if you rent, are a saver, and lose YOUR job.

You are also about to suffer repossession.

Your savings will be repossessed on a monthly basis, as your savings will be used to pay your rent, and pay for your upkeep. Savers are punished, you'll receive no JSA, and no support to pay your rent.

You'd have been better off enjoying it down the pub when you had the chance!

Or splash it on an suv and join the handout massive 

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1 hour ago, Switch625 said:

According to the OECD the outlook for the UK unemployment figures, currently at 3.9% are truly awful (https://www.theguardian.com/business/2020/jul/07/uk-jobless-rate-coronavirus-oecd-unemployment).

  • No second wave of Covid-19, the UK’s unemployment rate is likely to rise to 11.7% by the end of the year
  • A second wave of Covid-19, the UK’s unemployment rate is likely to rise to 14.8% by the end of the year

For comparison it peaked at 11.9% in 1984 the highest level since 1984 when it peaked at 11.9% and the current UK unemployment rate is 3.9%.

The furlough scheme has failed to save almost 2/3 of a million jobs so far and starts to unwind as of the 1st August when employers have to start paying ER NICs and pension contributions in addition to the governments 80% of wages up to £2,500. This employer contribution will increase to 10% of wages in September and then 20% in October.

So unless they change the rules on how and when furlough ends we will see rapidly rising unemployment starting in about a fortnight.

To this add the fact that the debt to income in this country is over 140% per household (https://data.oecd.org/united-kingdom.htm), including an average credit card debt of almost £8,000 per household, with 48% of households having less than £1,500 in savings  (https://themoneycharity.org.uk/media/Feb-2019-Money-Statistics.pdf). A sizeable proportion of people in this country will be simply unable to stay afloat beyond a month if a household member losses their job.

With figures like that I don't see any option but  MASSIVE government intervention and if anyone thinks debt forbearance is likely, I would remind them what banks do when bailed out .... 

image.png.958ae2ca1891fceb3d1a39effb3c2a4d.png

 

Great post Switch

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Thanks @Doner Kebab the figures are mind blowing, you simply couldn't make this stuff up. People on this site and plenty of others who aren't HPC'ers have known this for years.

To quote Warren Buffett 'It's only when the tide goes out that you learn who has been swimming naked'.

The water level is going to start dropping on the 1st August ...

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Won't be as bad as some think.

The UK is basically a money laundering and dirty money spiv haven. Politics has changed, and this government's onus is to keep the cash coming in regardless of how it was obtained.

Anyone buying anything north of 1M in London this past decade won't be British anyway. It's all Russian, Asian, and Arabian "funny money".

 

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35 minutes ago, byron78 said:

Won't be as bad as some think.

The UK is basically a money laundering and dirty money spiv haven. Politics has changed, and this government's onus is to keep the cash coming in regardless of how it was obtained.

Anyone buying anything north of 1M in London this past decade won't be British anyway. It's all Russian, Asian, and Arabian "funny money".

 

But how?

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3 minutes ago, Si1 said:

But how?

Have the rich actually lost money?

Companies, proles, but the rich? 

What about the "dodgy" rich? Your gun runners, your trillion dollar illicit drug markets, your thieves of state assets (usually oil and gas)? etc etc.

The plates will spin. Watch.

Edited by byron78
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Just now, byron78 said:

Have the rich actually lost money?

Companies, proles, but the rich? 

What about the "dodgy" rich? Your gun runners, your trillion dollar illicit drug markets, etc etc.

The plates will spin. Watch.

That's not really an answer. I realise the rich, invested in assets, have been ok. But the sources of their incomes are still weaker if not their capital. And I doubt China as a nation state is keen on its citizens investing in the UK much more, via real estate or higher education, given the diplomatic chill, Hong Kong, and our poor covid19 management.

 

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5 minutes ago, Si1 said:

That's not really an answer. I realise the rich, invested in assets, have been ok. But the sources of their incomes are still weaker if not their capital. And I doubt China as a nation state is keen on its citizens investing in the UK much more, via real estate or higher education, given the diplomatic chill, Hong Kong, and our poor covid19 management.

 

Right - a lot of governments will be making cash calls on their oligarchs to stave off riots. They will be even less likely than they have been in recent years to see the money slip out.

Be interesting to see what the US does with its elite come November. Biden could try and soak the rich with the young behind him and buy off the poor helpless masses who previously voted Trump because globalization.

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https://www.bbc.co.uk/news/business-53448181

Lynn and Martin Fox had remortgaged their home to pay for a holiday of a lifetime to Florida.

The couple finished paying for the holiday in January, but Mrs Fox, 42, then lost her cabin crew job at Flybe when the airline collapsed in March.

Weeks later, as the virus lockdown took hold, work dried up for her husband, a pipe-fitter. Then the holiday, planned for late April, was cancelled.

?‍♂️

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34 minutes ago, Switch625 said:

https://www.bbc.co.uk/news/business-53448181

Lynn and Martin Fox had remortgaged their home to pay for a holiday of a lifetime to Florida.

The couple finished paying for the holiday in January, but Mrs Fox, 42, then lost her cabin crew job at Flybe when the airline collapsed in March.

Weeks later, as the virus lockdown took hold, work dried up for her husband, a pipe-fitter. Then the holiday, planned for late April, was cancelled.

?‍♂️

Sometimes it seems like a different planet!

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The Coronavirus panic is basically an accelerant that will hasten the trends that have been happening and push them through the various stages to the their conclusion a lot more quickly.  So we'll see strong inflation in assets, a boom then a collapse in prices..

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3 hours ago, Blink said:

A point to note if you rent, are a saver, and lose YOUR job.

You are also about to suffer repossession.

Your savings will be repossessed on a monthly basis, as your savings will be used to pay your rent, and pay for your upkeep. Savers are punished, you'll receive no JSA, and no support to pay your rent.

You'd have been better off enjoying it down the pub when you had the chance!

Take out from the bank as much as you can store safely at home. Make sure you have no more than a couple of hundred quid in the bank. At the appropriate time plead poverty and claim max benefits. 

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48 minutes ago, Khalia said:

Take out from the bank as much as you can store safely at home. Make sure you have no more than a couple of hundred quid in the bank. At the appropriate time plead poverty and claim max benefits. 

Sure, no problem with your holiday Monday.

If you've saved a solid £100k-£200k, perhaps not the most sensible decision in your life to put it under the mattress!

I'm sure they'll look back into your accounts for the past few years too, to check if you've syphoned money away discretely.

Im thinking a bank safety deposit box, but if inflation kicks in it will soon erode in value.

Any bright ideas anyone?

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9 hours ago, Blink said:

Sure, no problem with your holiday Monday.

If you've saved a solid £100k-£200k, perhaps not the most sensible decision in your life to put it under the mattress!

I'm sure they'll look back into your accounts for the past few years too, to check if you've syphoned money away discretely.

Im thinking a bank safety deposit box, but if inflation kicks in it will soon erode in value.

Any bright ideas anyone?

I use a company called Gold Money where you can move Gold between cash, crypto and other precious metals. You can have real Gold in a vault, and can even reallocate to different global vaults. Also, I got an email the other day from Revolut the saying now you can buy and hold real Gold (as well as Crytpo). Not sure how much I trust them...they are brilliant when it comes to multi-currency credit cards though, used them a lot the last few years. Having 5-10k in gold and cash in your house is a good move IMO. Anything under 10k taken out of your account and stashed won’t be picked up by governments.

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14 hours ago, Switch625 said:

According to the OECD the outlook for the UK unemployment figures, currently at 3.9% are truly awful (https://www.theguardian.com/business/2020/jul/07/uk-jobless-rate-coronavirus-oecd-unemployment).

  • No second wave of Covid-19, the UK’s unemployment rate is likely to rise to 11.7% by the end of the year
  • A second wave of Covid-19, the UK’s unemployment rate is likely to rise to 14.8% by the end of the year

For comparison the previous peak for unemployment in 1984 was at 11.9% and the current UK unemployment rate is 3.9%.

The furlough scheme has failed to save almost 2/3 of a million jobs so far and starts to unwind as of the 1st August when employers have to start paying ER NICs and pension contributions in addition to the governments 80% of wages up to £2,500. This employer contribution will increase to 10% of wages in September and then 20% in October.

So unless they change the rules on how and when furlough ends we will see rapidly rising unemployment starting in about a fortnight.

To this add the fact that the debt to income in this country is over 140% per household (https://data.oecd.org/united-kingdom.htm), including an average credit card debt of almost £8,000 per household, with 48% of households having less than £1,500 in savings  (https://themoneycharity.org.uk/media/Feb-2019-Money-Statistics.pdf). A sizeable proportion of people in this country will be simply unable to stay afloat beyond a month if a household member losses their job.

With figures like that I don't see any option but  MASSIVE government intervention and if anyone thinks debt forbearance is likely, I would remind them what banks do when bailed out .... 

image.png.958ae2ca1891fceb3d1a39effb3c2a4d.png

 

Great post. I agree there will never be bank forbearance, just roll over on loans ad-infinitum supported by government guarantees. I think the government will let houses slide 15% before It and the BoE uses every tool Available to prop up the market (By that time the Tory spivs with multiple homes will be demanding the government do stuff, even if it means more debt). If they can put 9 million On furlough for 6 months, then they can cover the interest (at 2%) on a house buyers loans until the economy recovers. I really see it happening. Virtually no repossessions, just a vast Zombie economy for 5-10 years. It actually makes sense. It will cheaper and probably better for the economy in the long run if people are allowed to stay in their homes, deferring their mortgage repayments for a few years, than allow a housing apocalypse. 

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@HovelinHove the figures speak for themselves.

Exactly what action the government will take is yet to be revealed to us, but rest assured it will be a 'democratic' process with plenty of misery handed out to all.

This has all the hallmarks of making the recessions of the 70's, 80's,  90's and 00's look like child's play in comparison.

Coincidentally this is a great link showing that recessions are just part of life.

https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_Kingdom

Edited by Switch625
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13 hours ago, Si1 said:

That's not really an answer. I realise the rich, invested in assets, have been ok. But the sources of their incomes are still weaker if not their capital. And I doubt China as a nation state is keen on its citizens investing in the UK much more, via real estate or higher education, given the diplomatic chill, Hong Kong, and our poor covid19 management.

 

China has never been keen on its nationals investing abroad but it's a damn sight better than investing in real estate in China where you can effectively only lease property and it can be taken away at the drop of a hat. Not to mention the incredibly poor build quality of many apartment buildings out there.

Edited by spacedin
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  • 417 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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