Bad Credit Families Are Set to Face Additional Costs of £1,800 if Interest Rates Climb
UK households, who currently struggle with bad credit debt, might need to find an additional £1,800 a year, simply to cover rising interest on their debt as inflation prompts rate increase uncertainties.
According to warnings by bank industry analysts, interest rates could start rising before the summer, resulting in mortgage, loan and credit card payment increases.
“Any increase of financial pressure on that budget could tip many households into bad credit debt circumstances, so they would be advised to resolve any debt concerns as soon as possible.”
The Bank of England base rate has stood at 0.5% for the past 22 months, but a study published today by accountants, PricewaterhouseCoopers, has predicted the rate will rise to 5% by 2015.
This figure will alarm many struggling households whose finances face being squeezed further by frozen or low pay rises and big increases in essential bills such as petrol, food, energy and clothes.
“The study will represent good news for some of the UK’s more fortunate families,” said Mr James, of Bad Credit Loans 4 You.
“As long as the banks pass on the expected interest rate hike, then the country’s 34 million savers will welcome the chance to earn some money on the cash they have put by.”
An increasing number of City analysts are now backing a rise in interest rates as they believe it will help limit inflation, which remains ahead of Government targets at 2%.
The Consumer Price Index inflation is at 3.3%, while the Retail Price Index, which is considered to be more representative of budgets as it includes housing costs, is at 4.7%.
Official figures are expected to show these figures were higher still in December 2010.
The recent meteoric rise in petrol costs, partly caused by an increase in duty and VAT, will push these figures up further in the coming months.
Some motorists are considering car loan credit in order to keep up with their running costs until they can find a way around it.
Fresh food items such as dairy products and many which contain wheat are also seeing their prices rise dramatically.
Supermarket own-label pasta is up by over a third, butter by 17%, orange juice by 16%, grapes by 40% and cauliflower by 28%.
Some City analysts believe that only taking money out of consumer pockets with a rise in interest rates, will force retailers and others to end their price hikes.
PwC has forecast a climb in total household debt from £1.45 trillion to a staggering £1.9 trillion by 2015, the same time as interest rates are rising.
It said; “Eventually, the base rate is likely to go back up to more normal levels of around 5% - and quite probably higher at some points in the economic cycle.
“Even if it takes fives or more years to climb back to these levels, interest rates on mortgages and other household debt could well be higher than before the recession.”
It continued, by saying; “By 2015, it is quite possible that average interest rates on this debt might have risen by 3 per cent.”
“This would lead to an increase in household borrowing costs of around £45billion at today's value. This equates to an extra £1,800 per UK household on annual interest payments alone.”
Mr James, of Bad Credit Loans 4 You said; “Consumers will find it difficult to absorb such a substantial increase in bad credit debt interest payments without making cut-backs on their spending.”
“It could lead to further falls in living standards for the average UK family, pensioners and others.”
Philip Shaw, economist at Investec, said the Bank of England is under pressure to take action to hit the 2 per cent inflation target, adding; “We were originally forecasting that interest rates wouldn't rise until the back end of 2011 but there is a real risk the Bank of England's monetary policy committee will have to raise rates sooner rather than later to protect its credibility.”
David Kern, chief economist at the British Chambers of Commerce, said rising inflation “will add to the pressure it is now facing for an early increase in interest rates.”
There are concerns amongst some members of the coalition and in the City who believe higher rates would de-stable the economic recovery, threatening a double-dip recession.
A rate hike could also turn the majority of people who are supportive of the budget cuts, against the government.
Peter Spencer, chief economic adviser to the Ernst & Young Item Club, commented that he thought the Bank of England should hold its nerve because inflation will drop back in late 2011 and 2012, without the need for rate rises.
“A premature rate rise would boost the pound, weakening the UK's ability to increase its exports particularly into the emerging markets which we have long maintained hold the key to the UK's economic recovery.”
Bad Credit Loans 4 You helps out people who fear they have been blacklisted because of past poor credit history which could include CCJ’s and defaults, arrears, late credit card payments or repossession.
Bad Credit Loans 4 You holds a Consumer Credit Licence issued by the Office of Fair Trading.
Bad Credit Loans 4 You is also covered by the Financial Ombudsman.
Bad Credit Loans 4 You is also registered with the Information Commissioner’s Office for Data Protection.
For help, phone 0800 011 4503 or visit
/bad-credit-loan-refinance.html
~Ends~
Notes for Editor:
/bad-credit-consolidation-loans.html
Loans 4 You of London Ltd
Innovation Centre
Monks Brook
PO30 5WB
United Kingdom
Tel: 0800 011 4503
Bad Credit Loans 4 You was formed in order to ensure people with bad credit had access to specialist help in securing the bad credit loans they need.
From its UK head office in Monks Brook, Loans 4 You operates across Britain, sourcing bad credit loans for people with bad credit.
Bad Credit Loans 4 You holds a Consumer Credit Licence issued by the Office of Fair Trading.
Bad Credit Loans 4 You is also covered by the Financial Ombudsman.
Bad Credit Loans 4 You is also registered with the Information Commissioner’s Office for Data Protection.
