Financial crisis? What crisis?
Amid all the doom and gloom about the economy, it comes as a surprise to discover that quite a lot of people are suddenly and unexpectedly beginning to do well out of this downturn. Nor are they the much reviled hedge fund managers or, indeed, anything else to do with the City.
A friend who is a police superintendent recently told me that - to his amazement and thanks entirely to the severity of the recession - he has never had it so good. His wife is a part-time school administrator and with two secure jobs they do not have to worry about unemployment. Having bought their house more than ten years ago, the economic crisis had largely passed them by until recently.
Payments on their mortgage have halved and the shops are discounting heavily
Then the Bank of England started to slash interest rates, and suddenly my friend found that his family's purchasing power had rocketed. The payments on their tracker mortgage have almost halved and most of the things they want to buy in the shops can be had at a huge discount. Even petrol is down 25 per cent since the summer. To cap it all they have two public-sector pensions to look forward to, so they are not unduly worried about saving.
The only fly in the ointment is that the weak pound has pushed up the cost of foreign holidays. But with all the other good things that are happening to them he is confident that they will find the extra for their usual stint in the sun.
In economic terms, the important thing about my friend is that there are millions more like him. Forty per cent of all mortgages track the base rate, and over a quarter of all employees work for the public sector. Changes in interest rates - up or down - are usually reckoned to take between one and two years to feed through to the general economy.
This time, however, the cuts in both rates and prices in the shops have been so sudden and dramatic, that - at least for some lucky people - this process could be drastically foreshortened.
Economists and commentators have yet to focus on this group, which has really only emerged in the last few weeks. But assuming interest rates stay low for more than a few months, these unexpected recession winners could be crucial in helping to stabilise the economy. ·
Comments are now closed on this article