3 March 2023 - Economy could face recession if housing remains weak

The makeup of the UK economy is such that when the Bank of England is faced by the need to change its monetary policy to either stimulate, or restrict activity, the property market is normally the first sector to be affected. The reason for this is the knock on effect of the decision to either move or stay put, has on the rest of the economy. What starts with a decision to upgrade the family home leads to increased activity in several different areas. The services sector is stimulated with estate agents, banks, insurance companies and the legal profession all seeing an increase in activity as well as more artisanal areas like movers, decorators and landscapers. This activity generally begins with existing home sales but quickly spreads to new builds, where first time buyers often denude their savings to provide a deposit. This reduction in the savings rate also stimulates economic activity. While a cut in interest rates stimulates the economy, the opposite is true for a scenario where rates are rising. It starts with a decision to maybe stay put as mortgage rates rise and householders see an increase in their monthly payments. This is also true of making any alterations to an existing property, and knocks-on all through the economy. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.