Who Will be Better off in the Economic Downturn?
Reducing Household Bills During a Global Recession
Mar 3, 2009
The UK has entered a recession for the first time since 1991. The economy shrank by 1.5% over the last three months of 2008, representing the sharpest economic downturn since 1980. The Confederation of British Industry (CBI) expects that the global recession will last throughout 2009 and that UK unemployment will reach a peak of 2.9 million.
Does an Economic Downturn Really Assist Anyone?
Whilst a global recession is bad news for the unemployed, retired people on fixed incomes and home owners on fixed-rate mortgages, others stand to benefit from the economic downturn. The chief beneficiaries of an economic downturn are employed people, home owners on tracker mortgages, first-time buyers, bargain hunters in high street sales and those seeking help with unsecured debts.
How Falling Interest Rates Help Individuals with Tracker and Standard Variable Rate Mortgages
Falling house prices and lower interest rates mean that mortgage repayments are vastly more affordable for those in existing variable rate mortgages during an economic downturn. First-time buyers with a £150,000 interest-only tracker mortgage currently only face mortgage repayments of £312.50 per month. It is now possible to save money and use this towards other household bills.
The Global Recession and High Street Sales
Retailers struggling to stay solvent are offering high street sales to attract buyers. Clothing sales are no longer seasonal, presenting consumers with an opportunity to re-stock their wardrobes at a fraction of the cost. High street sales for electrical goods are wide-spread. Employed people with a good credit rating are also able to benefit from 0% interest-free credit deals.
Whilst many retailers have perished during the economic downturn, high street sales have prevented the falls many economic commentators were predicting. The Office for National Statistics reported that sale volumes rose 0.7 per cent in January 2009 compared to 12 months earlier. Also, the British Retail Consortium said the value of retail sales rose for the first time since May 2008.
How an Economic Downturn Creates Opportunities for First-Time Buyers
According to the Halifax house price index, house prices have fallen by 16.2% in the last 12 months. The economic downturn has created a golden opportunity for first-time buyers to get a foot on the property ladder. However, negative equity concerns mean that a 25% house deposit is often required.
The Economic Downturn and Personal Debts
The Credit Action Group reported that the average unsecured household debt in the UK stands at £9,633. This has led to the government introducing a new debt solution, the Debt Relief Order, in order to help low income families write-off debt. Prior to the economic downturn, their plight was largely ignored by the government. Many debt collection agencies are also too busy to cope with escalating debt cases.
Whilst an economic downturn can make managing household bills unmanageable for those that have lost their jobs, it presents a golden opportunity for others. Whilst it isn't a sensible idea to rashly buy goods and services, it is a great time to save money in high street sales on things that are needed.
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