WHAT is going on?
A lot has happened over the last few weeks that has caused significant impacts on the UK economy. I had been planning to try and keep up with it all as and when it occurred but there has just been so much that it’s been almost impossible.
So here is a full breakdown on what has happened recently and what it means for you.
The Mini-Budget
Towards the end of last week we saw the Chancellor deliver a so-called mini-budget which unleashed some of the biggest tax cuts we have seen since the 1970s. The takeaway notes from this mini-budget are summarised in this Instagram post below:
Interest Rates Up
Following this huge package of tax cuts, the Bank of England continued to raise interest rates earlier this week from 1.75% to 2.25% which is a staggering 22.5 times higher than the interest rate this time last year.
This jump in interest rates is the best way to try to cool off record inflation levels which is hovering around the 8.6% mark in the 12 months to August 2022.
We knew that interest rates were going to keep rising until inflation rates fell to an acceptable level, but after seeing this increase it is now expected that interest rates in the UK could reach upwards of 5% in 2023.
The Housing Market
These sharp increases have had a severe impact on the mortgage market with banks unsure where interest rates are going to end up. This resulted in several banks pulling mortgage offers from the table leaving home-buyers in a grey area.
On top of this, anyone who is on a variable rate mortgage or set to come off their fixed rate mortgage in the near future is going to see a colossal spike in their costs which is going to spiral the Cost of Living crisis out of control and could be an indicator of another “perfect storm” for a housing crash.
This is due to sharp increases in interest pushing up the repayments needed on mortgages which will consequently see many households unable to afford to repay. If this happens it could cause people to sell their homes for a lower value just to prevent repossession from the banks.
The Pound Falls
On top of all of this, the markets did not react very favourably to all of this news this week as we saw the pound fall drastically, almost coming to a level-pegging with the Dollar.
This was mostly a reaction to the huge tax package which was delivered in the previous week which was dubbed as a risky strategy by investors.
Of course, this is also bad news for most of the British public as a weaker pound means imported goods will now become more expensive as we need more of our pounds to buy foreign goods than we would have last week.
A re-occurring theme here is that this is also likely to spiral the Cost of Living crisis into even more of a problem, considering just how much the UK imports from overseas, particularly from the US.
Energy Prices
From today, the new energy “cap” which means that the average household bill for energy will cost around £2,500 comes into place. If you haven’t yet it’s not too late to take a meter reading and submit this to your energy provider.
Please note how you will be able to receive your £400 from the Government in this recent blog post.
My Thoughts
I know I have summarised all of this information into a very short post, but I think that there is such a lot of information that should be condensed. These are worrying times and I think that as a nation we are losing confidence in our Government more and more every day.
If you have any concerns or questions regarding everything that has been happening please do not hesitate to let me know on Instagram.