Have We Hit Peak Cost Of Living Crisis?

January 18, 2023

Even the most optimistic people will have to concede that 2022 wasn’t a vintage year for positive news stories. As we still reeled from the shock of the pandemic, news came of the Russian invasion of Ukraine, which sent energy prices soaring, and average grocery bills increasing by as much as 10%.

As this wasn’t enough to deal with, the UK experienced unprecedented political instability, going through three prime ministers and four chancellors. The financial chaos wrought by the disastrous September mini budget spiked mortgage rates, bringing further woe for householders.

However, the picture for 2023 might not be so bad as many have predicted. For a start, the long expected recession has yet to materialise, with a surprise growth of 0.1% in the latest figures. Energy prices are predicted to fall this year following the peak last autumn, which will boost the economy further.

The Government cap on energy bills and help for businesses is also expected to yield results. Chris Giles, economics editor at the Financial Times, recently said in a BBC interview that fears for the state of the economy have been revised down since last November, and the picture is not so gloomy as was originally feared.

Mr Giles said inflation will fall to below 6%: “We are expecting the number to be quite a bit below 6 [per cent] by the end of the year, we’ve had a lot of the big increases in prices; in gas prices, in food prices, they’ve already happened. So things shouldn’t get much worse and that’s why we might well be feeling better by the end of the year.”

The housing market is also bearing up more strongly than was first thought, with no major crash in house prices expected. Strong employment figures have meant that there have been no increases in home repossessions.

Ann Haines, a building society CEO, told the Independent: “We haven’t seen across my own business, or indeed others in the sector, any increase in repossessions.”

She added: “We are getting more calls from customers who are concerned and that’s understandable given some of the very difficult increases that we’ve seen in gas, energy, petrol and food as you’ve just been talking about.”

“But certainly cause for optimism, we have a very strong employment market, so in the past whenever recession has come, we’ve tended to see big increases in unemployment and we’re not expecting to see that, so that does give some cause for optimism.”

The Bank of England, who are responsible for setting UK interest rates, have commented that there will be a fall in the price of imported goods, as production issues start to ease. There will also be less pressure on prices, as the post-Covid boom in demand for services and goods falls away.

This is encouraging news for anyone who is facing the prospect of remortgaging their home, or getting on the property ladder for the first time this year.

If you would like to talk to CCJ mortgage brokers, please get in touch today.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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