ARE we heading for a full-blown recession or not? And do you really care? While the obvious answer to this may be 'yes', the reality is that the cost of living has increased so much in the past few months that many consumers feel the UK is already in recession.
Mortgage borrowers are going through 'payment shock' as their sub-5% fixed rate deals come to an end. The limited options are to sign up to a much more expensive fixed rate or switch to your lender's standard variable rate that can be well over 7%.
On top of this, fuel bills are going through the roof and the gloomy prediction from Centrica is that gas bills could reach an average of £1,000 in the next few years. Filling up your car costs more than ever and now public transport fares are increasing, as operators try to recoup the extra money they are shelling out on fuel. The list goes on and it's got to the stage that whether we are technically in recession – two quarters of negative growth – is meaningless to anyone other than economists.
As James Fairweather, head of global equities at fund management group Martin Currie, says: "Whether we go into recession is really not important. If you ask the man in the street if the economy is vibrant and robust what will he answer? I've not heard anyone yet say that the current markets present the best opportunity since sliced bread."
It's in light of such pressures on household budgets that I find the following claim from Edinburgh letting agents Braemore Property hard to believe. It says "tenants are happy with the amount they currently have to pay for their properties and do not think that their rent payments have increased dramatically as a result of the credit crunch".
The firm said it carried out a survey of tenants and found that three quarters of respondents felt the level of rent they paid every month was "just right". A mere 9% believed they were paying too much per month for their accommodation.
According to Braemore, the findings prove that rental prices are not "spiralling out of control". What makes this even more surprising is that fellow letting agent DJ Alexander believes tenants are facing a 50% rise in rents in Glasgow and Edinburgh, on top of increases already this year, as landlords respond to rising demand for rented accommodation.
Having rented flats in both cities in recent years, I'm more inclined to agree with DJ Alexander. But if two letting agents can have such opposing views of rental levels, my tip to anyone looking for accommodation would be to do your homework before signing up to anything and be willing to haggle.
Fear of backlashSTILL on the subject of housing, while repossessions across the UK have been on the rise, they haven't rocketed to the levels many commentators predicted. While some states in America have row upon row of houses with foreclosure notices as irresponsible sub-prime lending comes home to roost, repossessions have kept a relatively low profile on this side of the Atlantic.
While there are still no official figures available for repossessions in Scotland, the Council of Mortgage Lenders reported that 40,442 actions were started in the first quarter of 2008. Given the impact of the credit crunch on the economy, this is a relatively small increase from 34,788 at the same time last year.
But a worrying theory I heard last week is that lenders are scared to repossess properties because of the backlash and potential legal action they may face from their customers.
During the housing boom, when the banking liquidity crisis was unheard of, some less scrupulous sub-prime and self-cert lenders may have been a little too encouraging to borrowers. To build up their loan books, lenders may not always have insisted on proof of income or, dare I say it, may even have encouraged customers to exaggerate what they earned.
Apparently, the concern among some lenders now is that if they try to repossess a property, the customer may accuse them of misselling and getting them into this mess in the first place. My worry is that when we start to scratch below the surface, the housing market may well be in a worse state than it appears.
Equitable saga runs onLAST week, Equitable Life policy holders finally got some answers with the long-awaited publication of the Parliamentary Ombudsman's report into who is to blame for the insurance giant's demise.
But it's still not over for the policy holders who suffered dramatic losses as the Government is dragging its feet. Despite the report concluding that the Government should apologise to policy holders and pay compensation, Chancellor Alistair Darling has said he will not make a formal response until the autumn.
Will the saga ever end?
