If you’ve got less than £10,000 in equity, the cost of a 2-year tracker mortgage with Nationwide is now 7.1%. Both Nationwide and Halifax have jacked up their rates, with other lenders expected to follow suit. The reason? They don’t want too much new business.This may seem a bit daft at first blush. But it fits in with the current financial climate, as Frank Hemsley of Profit Watch fame explains:

“We’ve seen the three-month LIBOR [London Inter Bank Offer Rate – the rate at which the major British banks lend to each other] set at 5.995% this week, way above the Bank of England base rate. If banks are nervous to lend each other money, what are the chances they’ll want to lend to us? How many borrowers will still have a job if we get a recession?”

So will we get a recession? Lehman Brothers thinks we won’t, although the story is being reported in a way that suggests the opposite. Lehman yesterday forecast a 35% probability of the UK seeing a recession as a result of the credit crunch.

These sort of numerical predictions always make me smile. To me it says that if 100 parallel Britains in parallel universes diverged from this point on, 65 of them would not have a recession. The number is meaningless.

Nevertheless, if we move away from the econometric models and assumptions that spit out such figures, we see a pretty bleak big picture. Higher mortgage rates will doubtless dampen the housing market. Even if we don’t see an all-out crash, our economy is precariously balanced. We can do without this kind of bad news…

Then there’s the City. Some City workers are finding themselves at a loose end, or out of a job. A friend of mine, who works in mergers and acquisitions, says he’s still fairly busy, but only because his department has more than halved in size.

“I’m just a salesman at the moment,” he says, referring to the fact that he’s selling assets to raise funds. “They won’t give me any money for new deals.”

With credit lines frozen deals worldwide are being scrapped. This week it was the turn of private equity groups Bain Capital and Thomas H Lee, whose $19 billion buy-out of US broadcaster Clear Channel collapsed on Wednesday.

“What do people actually do for a living outside London?” asked Manraaj Singh at our meeting this morning, tongue firmly in cheek. Predictably this provoked howls of protest from the provincials amongst us, myself included.

But I see his point. Much of our economy is geared towards serving London. I’m including the public sector in this. Public sector jobs are paid for by central government, who receives much of its tax revenue from business conducted in the capital. Much of this business in turn relies on London’s pre-eminence as a financial centre, a pre-eminence which is under threat.

“I think people are seriously underestimating the impact the City’s demise will have on the rest of the economy,” says Manraaj.

How bad will things get for the City? And more importantly, how will it affect your wealth? The Fleet Street Letter team have put together a report which answers these questions. They recommend making three specific investments to prepare yourself for the economic thunderstorms ahead.