How Would a Recession Affect You?
19.10.2022 by Paul H
Market analysts assert that the future will become "gloomier and more uncertain" because of the Bank of England's prediction that the UK economy would experience a recession. A recession can have a negative impact on daily financial decisions since a poor economy typically leads to higher unemployment and lower wages.
A warning was issued following the Bank of England's largest interest rate increase in 27 years. This month, the Bank raised interest rates to 1.75% to contain growing prices. While a decline in the GDP is anticipated in the final three months of 2022, inflation is anticipated to exceed 13%.
Up until the end of 2023, it will continue to shrink. According to Andrew Bailey, governor of the Bank of England, if interest rates weren't raised, the pressure from rising costs would be "much stronger." Exorbitant energy expenses, mostly brought on by Russia's invasion of Ukraine and a shortage of gasoline, are the main contributing factors.
What caused the rise in interest rates?
The Bank has warned that by October, the average UK home's monthly energy costs will be close to £300. Since 2008, when lending came to a halt and the UK banking industry was in danger of collapse, the impending recession is anticipated to continue the longest.
According to Mr. Bailey, the hike in borrowing rates would leave people bewildered and would only make their situation worse. The alternative, according to him, was "chronic inflation," which would make life worse for Britons.
Raising interest rates has the effect of limiting inflation since it increases the cost of borrowing and encourages people to borrow less and save more. Homeowners are concerned that the increase will further squeeze their budgets, especially those who have mortgages.
How did the UK do in the 2008 economic downturn?
The global financial crisis began because of the recession in 2008. Across the UK, retail and home sales declined. The unemployment rate shot up following a wave of layoffs. As a result, the financial crisis's economic effects were made worse.
Declining retail sales led to the bankruptcy of several large high-street businesses, notably MFI and Woolworths, which led to additional job losses. The financial crisis had a particularly detrimental effect on the UK economy because of several unique factors. Because it lacked a sizable manufacturing sector, Britain's economy relied on expansion in the real estate, banking, and retail sectors.
The economy lacked substance due to its heavy reliance on risky credit borrowing and lending. When the housing bubble eventually burst in 2008, these industries suffered the most from the financial crisis. A financial crunch and steep reductions in housing values occurred simultaneously.
The UK suffered a considerable economic loss as a result, with long-lasting effects. Lending between banks was reduced right away. The interest rate quadrupled over night for financial institutions that continued borrowing.
The financing process all but stopped, and businesses of all sizes in all industries, but especially in the housing sector, felt the effects. Consumers struggled to make their mortgage payments, which significantly reduced retail sales.
Nobody was buying household items, DIY supplies, or furnishings. Reputable companies close their doors. Unbelievably, 26,978 UK businesses failed in 2008 and 2009, either by ceasing operations or filing for bankruptcy.
Sales decreased by 20% in 2008 because of the weak real estate market. The UK's economic crisis has had an impact on almost all non-vital sectors.
How will you get through the recession in 2022?
The Bank of England predicts that the recession will likely start at the end of 2022 and last until 2023. The anticipated outcomes include a decrease in employment, a decrease in business revenue, less job security, and difficulty obtaining pay hikes.
The prospect of corporate downsizing will also make it more difficult to get work. If you're concerned about the upcoming economic downturn and recession in 2022, there are some steps you can take to get ready.
Try to pay off the loans with the highest interest rates first, even if it's just a little at a time. If you are unable to pay it off completely, let the lender know about your struggles and request a temporary interest rate decrease.
Start building an emergency cash reserve immediately with any funds you have left over each month after paying your bills and other expenses. This might assist you with handling any unforeseen expenses or preparing for a layoff.
If you can set up a contingency fund, seek investment advice to determine whether there are any ways to raise the value of your assets. This may mean choosing consistently strong stocks. Sales of necessities like medicine and toilet paper won't often decline, but spending on luxury items will.
Even if you have a secure job, think about looking into alternative sources of funding. Try selling goods on online auction sites, giving consultancy services other than those related to your core position, or running an affiliate-funded blog. This suggests that you have a secondary source of income in case your primary one is lost.
Keep your credit score as high as you can. In times of economic uncertainty, lenders will only consider applicants with credit scores that are at least reasonably excellent. If you are unable to pay off credit cards or loans in full, work out a reasonable repayment schedule with the lender and adhere to it.
Keep in touch with your creditors if you're having problems making your regular monthly debt and bill payments. Most companies would rather keep your business by negotiating a more favourable repayment schedule than write it off as a bad debt and lose it when the economy improves.
You might be able to survive and recover from a recession if you have financial preparations in place during that time.
Logbook Loans secured against your car may be a handy solution if you need money for an urgent need or a financial issue at home.
To pay for unplanned bills of £300 or more, 16 million people in the UK are likely to take out loans, including logbook loans secured by their automobiles. Additionally, the amount of a logbook loan can range from £300 to £150,000, subject to affordability. To get through these historically unstable economic times, buyers may be thinking about pawning their unencumbered assets like prestige, classic, and vintage cars as well as other luxury items like fine art, watches, gold, and fine gems.
It's also important to keep in mind that pawning your luxury assets is a regulated loan that is non-recourse financing, which means your lender won't ever demand additional money if the value of their asset declines throughout the loan's duration. No matter if you are employed or self-employed, this is the ideal answer. Confidentiality is key, and since no credit reports are run and no search records are left on the credit file, the customer's anonymity is always guaranteed.
Getting a Logbook Loan: The Application Process
Apply for a logbook loan either online or, in some cases, at a local lender's physical location.
Don't hand over the keys until you've verified that the lender is authorised to do so by the Financial Conduct Authority (FCA) and the Consumer Credit Trade Association (CCTA), the trade group that enforces standards for how CCTA members treat their borrowers.
Why not consider LoanonYourCar.co.uk (LOYC), the UK's most trusted provider of 'Logbook Loans' and is directly licenced to operate by the Financial Conduct Authority.
To speak with a professional loan consultant, visit www.loanonyourcar.co.uk or call 0333 577 5000.
To learn more about how our loans will help you get through these difficult times, get in touch with LoanOnYourCar.co.uk.
Warning: Missing payments could cause serious financial problems for you. For support, go to moneyhelper.org.uk.