Around this time of year, the media in general is full of predictions about what the forthcoming year might bring for the economy and more specifically what that might mean for you and I, the general public.
This year more than ever, what might be termed the popular end of the media (typically tabloid newspapers and breakfast TV) have been ringing the death knell for 2012, and painting a pretty dark picture of what lies ahead.
Of course, bad news and controversy sells, and so there is always going to be proportionately more of that in the media than good news. But the key to understanding the way the media report is to have a healthy level of scepticism about what you read and hear, and what you should do when it comes to making decisions for you and your family’s specific circumstances.
The Wood From The Trees
It is more important than ever to understand what is happening out there, even on a basic level, and also the impact on you on a personal level. So lets take a look at some current news in the media and see what it could mean for you;
1. The Euro Is Dead
A general reference to the fact that the Eurozone countries with the weaker economies are in trouble and the entire mechanism could collapse.
ABC Verdict: It is certainly true that when you tie a number of economies together, you are only as strong as the weakest economy. Although the French and German economies are strong and have weathered the recession reasonably well, the economies of Ireland, Spain, Portugal and Greece in particular have not.
In our view, the Euro is unlikely to collapse and if anything the weaker countries that cannot be bailed out will be ejected from the Euro.
2. There is going to be a Double Dip Recession
This is a possibility – which basically means that the economy could go back to a scenario where it shrinks for more than three calendar quarters in a row.
ABC Verdict: This depends on whether there is another big bank failure like Lehman Brothers in 2009 – which is rumoured. However the economy has been bouncing along the bottom since 2009 anyway, with only very weak growth in between, so the impact of a small second dip could be quite minimal. It really depends how it affects consumer confidence.
Ironically a second dip could delay further the time when interest rates rise, thus helping out mortgage holders!
3. There is going to be a housing market crash
Basically a drop of 15% or more in a single year – which would see significant amounts wiped off the value of peoples homes.
ABC Verdict: Aside from the fact that a house is a liability, not an asset, the housing market has been stagnant for the past two years, at least. During that period, except in certain pockets of high demand and short supply, prices have been gently drifting downwards to the tune of 5% of so, as a rough average.
That combined with the cautious nature of mortgage valuers has seen some drop in values already.
A crash really depends on whether interest rates rise sharply, potentially causing high levels of repossession and lots of housing stock on the market at once. Given the lack of recovery, it now seems unlikely interest rates will go up significantly any time soon, so a crash would appear unlikely.
So What Should You Do?
Well, as we always say, get in touch with us now and we can help you through the maze with personalised advice – call us on 01702 468009, or get in touch via Facebook, Twitter or leave us a comment below – we are really interested in hearing from you!
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