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Inflation 18% interest rates 7% energy prices up 500% by next January

If these predictions come to pass (and so far every prediction made turns out to be optimistic).  Will you be able to cope?  

I will be on the edge without a very significant pay rise.  My fixed mortgage currently at 0.9% runs out next march - its going to kill me.

And to think, only recently you were aspiring to have a cleaner as well!

more seriously, I think there needs to be an honest conversation about whether the assumption that each generation should be better off is right

I am more worried about the inevitable crime wave at the moment

Energy fixed, no mortgage, obviously food etc will still be ££££ and assuming luxuries will start to become rare

But some people, already pretty crazed by events, are going to be fooking angry and I think they're going to hurt people

Also job losses seem inevitable and now we don't have the flexibility to move to Europe 

I am probably in the 10-20% of earners and if this comes to pass, I will be cutting discretionary spending  to he bone - no meals out, no new clothes, no holidays.  I dont see how we dont avoid a huge recession on top of everything else. 

They cannot raise rates much further without completely breaking the economy. We are too heavy built on debt. Another 1% max in the UK (less in the US) and then a pull back with more QE by the back door (hand outs, stimulus cheques etc.)

Main concern for me is buying a house. We’re on floating rate mortgages but they are very small. We will probably be levering up to buy somewhere but obviously rates will affect what we can get. Which is mostly a first world problem. Other than that we should be ok.

3 months ago fixed the last few years left on our mortgage @ 2.75%, so that's OK.

But all the other increases will obviously bite, and not sure I can whack up my charging rate to clients by much more than 5% at the end of the year.

 

Thankfully my electricity use is just about to decrease so I should be able to still cover the monthly payments having survived the summer.  Have just sold something to free up some cash which will also cover bits and still have a few things left that I can sell if I need to.

Fixed at 2.2% til 2025. If energy prices quintuple we will be pretty tight. My salary will increase by around 10-15% next year but I am definitely going to be poorer. Usually very risk-averse with personal debt but recently took out a credit card for emergencies. Repatriated some cash from Australia; left some there because I’m worried the £ is going to plummet.
 

In the absolute worst case GF can move back home with parents and I can move into hospital accommodation which would cost a few hundred a month all-in. Would be absolutely grim though. Tbh I don’t see that being necessary 

We as a family would be fine but there is absolutely no way on earth those predictions are coming true though. No way on earth. 

Inflation might get that high for a very brief period of time but the government would have to act/subsidise energy prices before they got anywhere near that and I will be absolutely amazed if the base rate gets above 4% in this cycle. I will be pretty surprised if it gets above 3% to be honest.   

I am likely to have to start subsidising my little sister soon though and possibly also my dad and step mum (who have no mortgage but also not much private pension provision). 

 

Guy - yes, I know that.  My point is the YOY rate might hit that level for a month or two but then drop radically. I wouldn't be surprised to see deflation briefly at the back end of next year as energy prices drop back down again radically. 

Inflation might get that high for a very brief period of time but the government would have to act/subsidise energy prices before they got anywhere near that 

I am sceptical that Govt can/will move quickly enough to do anything about energy price rises in the new year though.  They've been farting around long enough just over this £400 rebate and that should have been a very simple one to deploy.  

If it reaches 18% at all it means everyone is 18% worse off less any pay rise they may have had.   Using the term "briefly" implies it is a momentary problem, it is not, it is locked in reduction in real income unless we have deflation which personally I very much doubt.    Energy prices will go down and inflation will get less but doubt it 

I think a lot of prices will go back down if energy does drop as a lot of the recent price increases are simply passing on the increase in energy prices.  There's some virtue signalling for supermarkets to be the first to drop prices again to help your customers.

Plus they are only addressing consumer supplies.  Business energy is still going to be through the roof.
 

Yeah this is a big one which seems to be not receiving enough attention. How many SMEs can wear a several-hundred-percent rise in energy costs?

I mean measured "annually" as in over 12 month periods, I appreciate that every month the increase over the previous 12 months is measured and published.

The various inflation figures are published as monthly indices, from which you can infer inflation for any period you want >=1 month

I wouldn't be surprised to see deflation briefly at the back end of next year as energy prices drop back down again radically. 

If governments subsidise energy prices, what is going to cause energy prices to drop radically?  I'd say the time horizon for increased supply is more like 3 years.

Oh dear eeyore, somebody trying to be clever again.   Yes, of course there is a monthly increase (if this wasn't measured you couldn't measure the 12 month rollling rate every month) but it doesnt mean anything to anybody because "inflation" in everybody's mind is the annual rate and monthly figures too vulnerable to very short term factors to be terribly meaningful.

Why don't you just admit to spouting bollocks instead of shifting fundamentally from your opening statement and then claiming that's the only interpretation anyone could have put on what you said ? You're all over the shop on this. 

Actually I find the monthly figures more interesting as you can see clearly what has changed in price and get a better idea of whether the causes are short term or longer term.  Also easier to see if they've captured a freak event like the fact that gas suddenly spiked yesterday although it will no doubt then fall back but that might not be reflected until next month.

Interest rates have to go up.  In the 80s we had real rates of 5% to tame inflation. That would be about 15-20% now.

Clearly we are not going to do that.

But nominal rates will have to go up to go above 5% and thats still pretty loose.

The 20 year reckoning is due.

People under about 55 who still have big mortgages and havent fixed (which means fix long not one of these laughable 2 yr ‘fixes’) are about to learn just how badly the Boomers fooked them.

The Boomers are going to have to cancel their cruises and spend on extra blankets.

Gen Z will, hopefully, learn to vote for someone other than Tory, Labour, Green, Or Brexidiots. fook knows who though. They will need to invent some new parties. Maybe reform the old Liberals.

Had to make the decision this month to cut back pension contributions to free up cash.  Feel lucky to be in a position to be able to do it, rather than already be at full stretch.    

There's a lot of bad hews around but people need to try and relax a bit. A lot of forecasts don't come to pass and no-one can see into the future. Things will not happen as the media predicts is a cast-iron prediction. Make changes where you can to mitigate the costs etc and then let's see what happens.

 

By the by, The Economist is reporting that food prices globally (priced in USD) are back to pre-war levels. Not necessarily good news for countries whose currencies have slumped against the greenback but just shows that the news is not all negative.

"We don't have the option of moving to Europe"

90pc of the British population never had the option of just picking up and carrying on in Europe at the same professional level as before, and Europe is equally turbofvcked anyway

 

Energy is a global market, and inflation driven by global energy costs cannot and will not be combatted by domestic monetary policy. If I were the governor of the BoE I would make this point trenchantly and refuse to move rates. I’d tell the government to do what the doss society-raping nose-in-troughing vile tory khunts should have done a decade ago, and invest in new energy sources and energy security. We should be running off 100% nuclear and domestically generated renewables by now.

Not necessarily good news for countries whose currencies have slumped against the greenback but just shows that the news is not all negative.

So all countries except Switzerland and Norway I'm guessing?  USD has strengthened against more or less everything.

Fixed at 1.5% until 2024 so should be alright.  Interest rates will actually benefit me if banks ever decide to pass it on to savers - should mitigate the rise in energy bills if so.

Come on. Most people here will be on 60k+. Many will be in 6 figure territory. Possibly with a partner earning similarly. If you can't handle a bit of inflation, you are probably spoiled and have to learn appreciating live without all your middle class dream expenditures, and you were already spending far more than necessary pre-inflation. Just cancel your biggest yearly holiday trip and it will easily pay for the energy cost inflation. If not, stop heating your swimming pool.

If you're on 30k or less, of course this inflation is a tragedy. But how many here are?

Calvin, I didnt ask if anybody was going to suffer a tragedy I asked if they could cope.  Why shouldnt a middle class board discuss the problems they will face? There is always somebody worse off than you of course.  So what?

I can't believe people are still talking about BoE interest rates as if they would make the any difference to this inflation. They'll get raised anyway as the government is scapegoating the Bank, but nothing other than energy price intervention will limit it

It needs to happen. The apocalyptic market sentiment and collapse in confidence created by the headline inflation number is gonna have way worse long term effects on the UK economy than even the massive cost of subsidising energy.

Half of Europe has the exact same problems, but they're just hiding them with subsidy which is sensible and will benefit them and put them in a better position to bounce back.

How mad is it that we just don't have a government right now? Every year brings new and insane ways for the Tories to fail at their most basic responsibilities. 

Calvin heating the pool is £100 a month for five months a year and less than that if you have a summer like this where it's been heating itself for the last month or so.  That £500 won't make much of a dent in my general electricity bill which has already doubled this year.  I suppose I could make my parents sit in the dark and just have the lights on in my office.

Pancakes the Tories will u turn on this.    They dont give a fvck about the struggles of those on benefits but once the average mortgage holder starts to feel pain they will act-  without them they have no voters.

Calvin is your position that it is not appropriate for us to discuss how lifestyles will change and what measures we will need to take just because there are people worse off than us?  

What an odd standpoint.

My sympathy for the financial struggles of people with private swimming pools is very minimal. If you're on 60k+, which most of us here will be, there's always options to make big expenditure cuts that don't need to make your life miserable. 

Calvin, if interest rates did reach 7% I may actually not be able to make my mortgage repayments.  This may not be a "tragedy" but it is a big thing for me.

Not really.  I don't have any discretionary spending once I've paid all my direct debits every month and just have enough to cover travel to work and food although have to dip into savings and selling assets occasionally which is due to partially funding aged parents.  Bad but I every now and then I wish they'd keel over so I can sell up and become solvent again.

Half of Europe has the exact same problems, but they're just hiding them with subsidy which is sensible and will benefit them and put them in a better position to bounce back.

It isn't sensible unless some thought is put into who is going to use less gas and how this will be effected.

Calvin is your position that it is not appropriate for us to discuss how lifestyles will change and what measures we will need to take just because there are people worse off than us?  

I understand that the current levels of inflation will affect the lifestyle of everyone. Although for some it will just mean that they don't see their savings grow as fast as before. And I understand that there may be a need to share experiences and thoughts about how it will or may affect your own lifes.

It's just that this cost of living crisis is a real crisis for many. So it feels very first-world-problems to me to discuss if not heating your pool will allow you to keep doing those yearly skiing trips. 

When is / was the best time to switch jobs, taking into account inflation (assuming you can get an inflationary raise but then you’re stuck with low raises for the next year), chances of recession / being kicked as last in first out. Is it:

1 year + ago

6 months ago

Nowish

In 6 months (looking now)

In 1+ year, or just not.

It isn't sensible unless some thought is put into who is going to use less gas and how this will be effected.

Not if you just subsidise until the price drops.

What is the total cost of subsidy to European governments vs the cost to the UK government of not?

The cost of strikes, the cost of aligning public sector pay and state pensions to headline inflation numbers being juiced by energy costs, the lost tax revenues from the economic activity killed by small business collapses, the cost of RPI-linked debt?

The insanity of what we're doing is that subsidising energy is the cheap option. 

If this is a 1-2 year "bump" in energy costs then I agree, Pancakes. Could save a lot of strife, and - importantly - yet another locked in massive hike in state pension costs.

How does this work with a fixed supply of gas though?  Either governments completely takeover the wholesale supply of gas and it runs out because the clearing price is above the level at which they are subsidising it, or they don't and the wholesale price just runs away until the poorest government runs out of cash.

I think this is the fundamental misunderstanding here.  You can't fix the price of something that is in fixed supply without it running out.

I got offered a fixed rate in May for a year that was 22% higher than the variable rate, I am grateful I took it!  I only move into variable next June 1st, which is over the winter hump.

I wonder though if electricity companies will be able to honour all of the fixed rates.

I have no mortgage and now have insurance for my wood burning stove (as well as retardant on the thatch).  I therefore think my fuel costs will actually go down.  

In terms of other inflation,  I'm quite frugal so I won't really notice it.

What this will have is a knock on effect on jobs since some businesses can't survive and I'm not looking forward to that.

It's going to be shit.  I am hopefully in a good place work wise but you never know.

 

What Calvin said. Fix your mortgage, even pay the ERC if you have to. Then it's just energy and food. For the latter, eat out less. For the former, just sell some crap on ebay.

Even with a higher rate mortgage fix, I'm going to be at least a grand a month poorer come winter time but I have enough flex in my budget for that. Not a disaster but just really annoying and feels like a real step backwards.

Next year's pay "rises" will be interesting for sure. I'm due a promotion bump of at least 10% but add 15% for inflation, I just don't see it. Maybe they should put us on 4 day weeks for same money instead and we can do Amazon deliveries or something.

There’s no logic in raising interest rates to curb inflation in the current circumstances. This only works when it will dampen an overheated economy by forcing people to rein in discretionary spending.

When inflation is being driven by huge increases in the cost of the basic necessities of life, raising interest rates will have precisely zero effect on inflation whilst pushing people further on a downward spiral into poverty.

I have seen it all before and worse not that that is any comfort to anyone today. My energy bill is now just under £700 a month (big house) and presumably will go even higher. Mortgage is relatively low so that is not an issue now but has been a massive problem in the past eg when we locked in 10 years at 13% and the day rates rose 5% etc; we were paying 17% at one time in the time of milk and honey when young people today think the past was some kind of easy bed of roses....

 

I expect I will cope. I can always work harder.I have 5 adult children and hopefully they will be okay too. We shall see. Necessities are things like drinking water, shelter, food so people's needs are fairly small compared to our wants.

Interest rates will never get to 7%. All the central banks will be wetting themselves to go back down to 0 and launch QE galore by spring.

Russia is putting a brave face on a shitstorm of their own making - their last role of the dice was turning off Nordstream. In a year's time people will have maxed out on renewable investment for geopolitical reasons and that will be the end of them. 

Yes this is bad for those that nobody seemed to give much of a shit about as the Tories screwed the country since 2010, but for the handwringers on here you have to wonder where all their not commuting/not going out/not holidaying savings went. Presumably on Farrow & Ball paint and a new Tesla run off gas powered mains electricity. 

Some absolutely hysteria in this thread.

You do know that a recession is an engineered response to soaring inflation. As in, it’s an indirect and deliberate effect of monetary policy to control and avoid a complete shit show?  Recessions are pretty common, usually last two years at worst and historic data shows we recover from it.

On inflation, we’re nowhere near where we were in the 70s. Yes it’s bad if you compare over the last ten or twenty years, but not that bad. And again historic data tells us we can expect inflation to drop back down again after a short peak, likely next year. 

As in, it’s an indirect and deliberate effect of monetary policy to control and avoid a complete shit show?
 

I think the point is that monetary policy can’t exactly control the current situation 

It's true that we recover from recessions, as in the world doesn't end. However, not all people/countries recover equally.

This has the potential to be the 3rd shock in 15 years (financial crisis and COVID) and the UK/Europe is not well placed to face it. 

The nothing to see here lot are simply wrong.   This is going to be an enormous shitshow.  There are senior  members of the TORY party saying millions face destitution FFS

I guess the question is slack.  If utilty bills are 5k in Jan when a year ago they'd be 1k then you need to think whether you have 4k spare, or can make those savings, to compensate.  I reckon 80% of families would struggle with that, as there isn't much slack

I don't think interest rates will get as high as predicted

It will be a short term shitshow that the government will have to intervene to ameliorate. The UK is still rich enough as a country to withstand this without massive suffering and even under Truss electoral reality will mean the cost will have to socialised to a large extent.  It's true the last 15 years have seen a lot of shocks and we could do with a period without any more though! 

There are big questions coming for the Eurozone again in terms of the willingness of the richer states to subsidise the poorer states. 

I also wonder if Norway might come under pressure to supply Europe at below market rates... 

Crude oil is trending downwards and will continue to.  All of this is due to global supply issues so thank god we have an incoming PM that wants to lower taxes and allow foreign direct investment to open up supply.  Under 'big state' Rishi, I would be more gloomy

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