As the plane touched down at Heathrow at the start of the glorious London summer, the skies were sunny and our future appeared to be equally bright.
My husband and I were finally back in the UK, this time with two children and a six-metre container in tow, excited to start our new jobs and lives in the capital after 11 years living tax-free in Abu Dhabi.
We had been planning to make the move for more than a year and chose to do it for many reasons, several of which did not involve finances.
But at the time, it was not immediately clear how bad things had become in the UK.
There were certainly signs, with talk of frightening energy bills to come this winter and rising prices.
Those fears initially seemed unfounded, at least to us, with both smaller bills and costs for our weekly supermarket shop.
But over the following three months, the UK economy continued to spiral, something that will affect our financial plans going forward.
In 2008, we bought our first home, going “all in” with our maximum bid in an effort to secure the lovely little flat in our home town of Aberdeen in Scotland.
That turned out to be right at the top of the market.
Its value has plummeted since, as we painfully learnt in 2020 and 2021 when we tried to sell it at about a third less than what we bought it for. There were no takers.
We think — indeed, we hope — both the market and our apartment’s value have improved since. Aberdeen’s fortunes appear to be on the up with a possible future in green energy, and the housing market’s prospects are, as we learnt, inextricably linked with the city’s economy.
But being unable to sell our apartment prevented us from this year buying a family home in London, where you need every copper you can find behind the cushions to afford the exorbitant prices.
Despite the hit we took on our apartment in Aberdeen, we will still walk away with tens of thousands of pounds, having owned it for 14 years. That matters in a market where a two-bedroom apartment, which is smaller than we need, can cost £800,000.
In addition to that, buying a second home attracts an even heftier stamp duty, adding 3 per cent on costs — which turns out to actually be quite a lot, based on London prices.
Those factors put our plans to buy on hold for at least a year, which may have turned out to be a stroke of luck.
If we had bought in London this year, we would likely have bought at the top of the market — again.
Prices in the capital are forecasted to fall by 12 per cent by the end of 2024, partly due to increases in interest rates, Capital Economics reported, which means our timing may be better next time around.
And then there is the matter of interest rates.
We still have a mortgage on our Aberdeen apartment, but it is small in comparison to the one we will have one day in London.
Interest rates are expected to soar, almost trebling between now and next year to 6 per cent. On a mortgage of several thousand pounds, that difference could mean disaster.
It would also be comparatively more expensive than in the 70s and 80s, when people faced interest rates of 17 per cent, but personal debt was lower and salaries were higher compared to housing prices.
“The key thing is what rate you were paying when you took the mortgage out,” Sir Charlie Bean, a member of the Office for Budget Responsibility for four years until 2021, told Radio 4’s Today show on Tuesday.
“People [take] out much bigger mortgages today than, say, I took out when I bought my first house. Even though rates were much higher then, it was easier to service it.”
That makes a rate of 6 per cent today higher by comparison, he said.
“Some households don’t get hit immediately. It may take time for their rate to change if they are on a fixed rate, but eventually it starts feeding through,” Sir Charlie continued.
“And obviously if you are taking out a new mortgage, you get hit straight away.”
But the rising interest rate is only one of the many issues facing the UK economy. The falling pound is another.
Sterling fell to a record low of below $1.04 on Monday, as markets responded to a “very large, unfunded tax cut”, Mohamed El-Erian, former chief executive of Pimco, one of the world’s largest investment managers, added.
Speculation swirled the Bank of England may impose an emergency interest rate rise in response.
It did not, in the end, choosing instead to issue a statement to say it would not hesitate to change interest rates to control inflation.
But experts have said it probably should have.
“The bank are, I think, rightly reluctant to have emergency meetings every time there is turmoil in financial markets,” said Sir Charlie.
“There have been occasions, certainly after Lehman’s collapsed, we had an out-of-cycle meeting to cut rates along with other central banks.
“That said, I think on this occasion, if I had still been at the bank in my role as deputy governor, I certainly would have been counselling the governor that I think this is one of the occasions where it might have made sense.”
Our apartment may have saved us from buying into the overheated London market.
But there is, however, no getting away from the fact that, if we had stayed in the UAE, we would have effectively received a pay rise due to the favourable dirham-to-sterling exchange rate, as we sent our savings home each month.
Being a positive thinker, I believe — hope — the pound, along with all of our prospects in the UK, will improve.
Until then, I will cling to the fact we are richer in other ways, including being closer to family again.