State of the Market

[jamesbrown]

I don't think I can dumb it down any more.

I wouldn’t worry, your level of dumb is exemplary

[dsc]

Yep, been contracting 25 years and never known it anywhere near this bad. I am getting no agents calling anymore. Nothing at all for at least 3 weeks. Guess a lot of agents have been laid off now, so don't even get any calls asking what I am up to currently. Don't see it improving any time soon either unfortunately after a report today that interest rates will remain high for the next 5 years.

I don't think it's about how long "higher" interest rates are going to remain, it's more about whether companies can push through with projects using mostly perms instead of super expensive "contractors" who are effectively perms. If that works, then yeah expect this to be the new normal.

[PerfectStorm]

Things have gotten to the point where I'm entertaining crackly phone calls from Indian call centres (not sure why - they never go anywhere interesting but I live in hope)

[PCTNN]

I wouldn’t worry, your level of dumb is exemplary

Great to hear, as I always try to write my posts to a level that even jamesbrown would understand

[PCTNN]

Things have gotten to the point where I'm entertaining crackly phone calls from Indian call centres (not sure why - they never go anywhere interesting but I live in hope)

Christmas on the bench while waiting for an outside contract so you can feel like one the few proper contractors out there?

[Snooky]

Average interest rate from 1977 to 2023 was 7.11%.

5% is not 'high' and it's shocking how many pundits don't seem to grasp that and wedded to the belief that 0% is normal.

This is true, and I remember paying over 15% on my first mortgage, but since those days lower interest rates over many years have stimulated much higher house prices / rental costs, so a 5% mortgage for the same LTV on the same property today - or the cost of renting a similar property - is likely to be eye-wateringly different than even 20 years ago, let alone the 1970s, yet contractor income hasn't increased by anywhere near the same degree (for many it's been virtually stagnant, or gone down when you account for inflation). If you've been working for 10-20 years, say, even if you earn an apparently decent rate you may still have a far larger debt:income ratio than someone who's 10 years further down the line than you.

[JustKeepSwimming]

This is true, and I remember paying over 15% on my first mortgage, but since those days lower interest rates over many years have stimulated much higher house prices / rental costs, so a 5% mortgage for the same LTV on the same property today - or the cost of renting a similar property - is likely to be eye-wateringly different than even 20 years ago, let alone the 1970s, yet contractor income hasn't increased by anywhere near the same degree (for many it's been virtually stagnant, or gone down when you account for inflation). If you've been working for 10-20 years, say, even if you earn an apparently decent rate you may still have a far larger debt:income ratio than someone who's 10 years further down the line than you.

Yes, but 5% rates are the medicine for the asset bubble. House prices in particular are going to fall significantly. Affordability will stabilise again to around 30%~ of household income, but debt to income ratio will be lower. We really need to build more to get affordability down to 25%~, which would free up a lot of disposable income.

Anyone who is still holding substantial unhedged debt? Remember the hilarious irony that you need to pay £680 to declare bankruptcy.

[Fraidycat]

I don't think it's about how long "higher" interest rates are going to remain, it's more about whether companies can push through with projects using mostly perms instead of super expensive "contractors" who are effectively perms. If that works, then yeah expect this to be the new normal.

So far this just a normal bear market, correlated with the stock market bear market.

I just had a look through previous FTSE 250 stock bear markets which coincides with previous IT contract market downturns:

Previous FTSE 250 bear markets

Peaked August 2000 - Bottom March 2003 - 2 years 7 month
Peaked May 2007 - Bottom November 2008 - 1 year 6 months
Peaked Jan 2020 - Bottom March 2020 - 3 months

Latest FTSE 250 bear market:
Peaked September 2021 - Bottom not confirmed yet.


I think the FTSE 250 will make a final bottom in 2024.

[edison]

Average interest rate from 1977 to 2023 was 7.11%.

5% is not 'high' and it's shocking how many pundits don't seem to grasp that and wedded to the belief that 0% is normal.

I think that average is distorted a bit by the very high rates and inflation for much of the 70s and into early 80s but I agree, 5% isn't 'high'. The Bank of England themselves state that 2-7% is the long run range with the exception being the 70s and post credit crunch.

[oliverson]

Yes, but 5% rates are the medicine for the asset bubble. House prices in particular are going to fall significantly. Affordability will stabilise again to around 30%~ of household income, but debt to income ratio will be lower. We really need to build more to get affordability down to 25%~, which would free up a lot of disposable income.

Anyone who is still holding substantial unhedged debt? Remember the hilarious irony that you need to pay £680 to declare bankruptcy.

No they're not. There'll probably be a slight dip, particularly in London and the South East. In Yorkshire where I live the prices have actually risen.

This was predicted back in the financial crash by all the big players predicting drops of 20-30% or more. Didn't happen. A number of sites were setup housepricecrash, propertysnake, etc, predicting gloom. They disappeared but will probably get resurrected again. I know a guy who sold because he believed all that nonsense. Don't think he could afford to get back on the ladder when prices fell slightly then rose even higher.

I think it's wishful thinking on account of those who can't afford a home. The kind that if they could would now be whinging because mortgage rates are 'unaffordable', despite being below the historic average.