Sky News – “Credit Crunch: ‘Worst Yet To Come'”

Credit Crunch: ‘Worst Yet To Come’

Sky News | July 10, 2008

In the last six months, the Sky News Money Panel has become much gloomier about our economic prospects.Right now almost every statistic is pointing in the wrong direction – the cost of living is rising, house prices are falling sharply, companies are laying off staff.

And then there is the ongoing credit crunch.

The portents are looking bleak, the whisper is of recession. The Bank of England’s Monetary Policy Committee has a lot to ponder.

We asked the 10 financial experts who sit on the Sky panel when they expect the UK housing market to recover.

If the Nationwide has got its sums right, house prices have been falling for the last eight months.

First-time buyers seems to be waiting to see how far prices will fall and those who do want to buy are finding mortgages have become more expensive.

The panel feel this is the beginning of a long correction and it will be 2010 at the earliest before prices start rising again.

Angela Beech, Head of the Personal Tax Department at Blick Rothenburg told Sky: “It is doubtful whether we have ridden the worst of this yet given that redundancies are in the main being deferred for the time being – more families will be forced into debt to keep a roof over their heads.”

We asked the panel if they think the UK economy is headed for a recession. Half said yes and all felt the UK economy is set for several years of very weak growth.

Ian Templeman, from the Institute of Directors said: “I think we’re heading into a downturn. Whether it’s a recession or not, who knows, but it’s going to be tough economically and I think it’s going to last well into next year so I think we’d better get used to it.”

The high oil price and the soaring cost of almost every commodity is impacting on our standard of living.

The price of many everyday goods and services has crept up making many of us feel worse off.

We asked the panel if they think we will be feeling better off in six months time. All 10 said “no” unanimously.

Nick Parsons from NAB Capital said: “There’s a real squeeze on disposable income at the moment.

“That’s not to say that average earnings are going to fall but the amount of money you have to spend on utilities, food, petrol and taxes is going up and up and we don’t see an end to that anytime soon. I think there’s a real possibility that come Christmas we’ll be feeling worse off than we do now.”

The Bank of England faces a dilemma: does it lower interest rates to stimulate a slowing economy or does it raise them to combat inflation?

Which is the bigger problem? The Money Panel feels that at a time of such uncertainty the Bank of England will opt to do nothing.

All 10 members predict rates will, for now, be kept on hold.

Published in: on July 11, 2008 at 8:11 AM  Leave a Comment  

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