Recession fears growing
There are fresh concerns that the UK economy could be heading for recessions, which is when two consecutive quarters record a decline in Gross Domestic Product (GDP). The recession alarm bell has been raised after new Bank of England data shows that the UK’s money supply has stopped increasing. The last time the UK’s money supply stopped growing was over 13 years ago. A leading economist has described the chances of recession as “inevitable” rather than likely.1
The finer details and explanations
The Bank of England monitors the supply of money, and recent figures have revealed that the UK’s money supply was no greater in July 2023 than it was in June 2023.
The money supply plays a crucial role in the UK’s economy. When more money is printed, consumers tend to feel like they have more money in their pockets, which encourages spending and therefore can cause interest rates to rise. For example, during the global pandemic and lockdowns, there was a sharp increase in the amount of money printed, which has been partly blamed for the post-pandemic inflation rates we are experiencing today.
On the other hand, when less money is printed, consumers typically have less in their pocket, which discourages spending and causes interest rate decreases. In this situation, the economy starts to shrink, which is the current state of play and has fuelled the recent expert-led fears that the UK is edging closer to a recession.
One chief business economist at S&P Global Market Intelligence is reported to commented on the data, suggesting the Bank of England’s fight against inflation comes at an increased risk of inflation.1
Is a recession a bad thing?
A recession is considered a bad thing in lots of ways, such as lower job security, inevitable job losses and poorly preforming investments. Yet, a recession is not considered the end of the world and can be looked at as necessary step to recover or correct an existing poor economic climate.
What does this mean for your mortgage?
Naturally, if you’re on a fixed term deal then nothing will change in your repayments until the fixed-term period ends. However, if you’re on a variable rate mortgage which is affected by the central bank’s interest rate changes, you could be affected by the news. The Bank of England’s own data suggests that a recession may be nearing, which may cause decision makers to be less aggressive with rate hikes in the near future. Of course, nothing is certain and the situation is fluid.
If you’re worried about your mortgage repayments, it could be best to take advantage of recent mortgage changes designed to help homeowners - and reach out to one of our qualified UK mortgage advisers for personalised support. We’re here to help!
Sources
1. https://www.independent.co.uk/news/business/recession-uk-economy-inflation-cost-living-b2397903.html
All the information in this article is correct as of the date of publishing. The opinions expressed in this publication are those of the authors Euxton Mortgage Market. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
October 2023
