Bad Credit Households Set to Face Further Misery as Forecasters Predict Interest Rates to Rise Six-Fold
UK families, many of whom are already living from one pay packet to the next, could soon face a rise of more than £200 per month on their mortgage bill.
Britain’s leading business organisation, the Confederation of British Industry (CBI), has predicted that interest rates will have to rise in order to control inflation and warn that they could go up six-fold.
“Even though the Bank of England has kept the interest rate at 0.5% for a record period, families are still seeing their finances stretched to breaking point because of inflation.”
The CBI said interest rate increases would come despite ‘very sluggish’ economic growth in the New Year.
Tax rises and further Government spending cuts will add to the misery as millions face thousands of pounds being added to their annual mortgage bills.
The CBI did, however, add that the chances of a double-dip recession were ‘low’.
It believes rates will climb to 1.25% by the end of 2011 and then further increase to 2.75% by the end of 2012.
“Figures released by Credit Action in November of last year showed that a property was repossessed every 14 minutes,” said Mr James, of Bad Credit Loans 4 You.
“This only stands to get worse as jobs are still scarce and pay increases are almost unheard of, so families will find it difficult to fight off bad credit debt.”
A typical home loan currently has an interest rate of 4.5%, but this could rise to 5.25% by the end of next year and then 6.75 per cent by the end of 2012 if the CBI forecasts prove accurate.
An increase in the base rate to 2.75% would make the average £150,000 mortgage £202 a month more expensive than it is now, £2,424 more per year.
This would be a huge blow for families already struggling with bad credit debt in the wake of the worst financial downturn in over 50 years.
The Bank of England’s recent Financial Stability Report indicated that two-thirds of the country’s 12 million outstanding mortgages are variable rate deals.
These are set to rise if the base rates increases, meaning millions will face larger bills and come closer to bad credit debt when they have benefited from cheap repayments in the past.
The fortunate households on fixed-rate mortgage loans will remain the same regardless of whether the base rate goes up or down, but many are on fixed terms which are due to end over the next two years.
Ray Boulger, of mortgage adviser John Charcol, said; “Those who will be hardest hit are those whose finances are already on a knife-edge because they have lost their job, suffered a loss of income or borrowed too much.”
“Most people will be able to cope but they should think about paying back other debts and cutting their spending in preparation for the rate increases.”
The Bank of England has set a 2% target for inflation over 2011, but the CBI expects it to ‘significantly exceed’ this figure, having been at or above 3% for the whole of 2010.
Ian McCafferty, chief economic adviser at the CBI, said; “This makes it more likely that the Bank of England will need to start pulling back from record low interest rates earlier, rather than later, this year.”
The warning will add to fears of a further slump in the housing market and Howard Archer, economist at IHS Global Insight, predicts home values will fall by 10 per cent next year.
A survey by Markit Economics found households are increasing their bad credit debts and running down savings to fund extra spending due to inflation.
18% of Britons had taken on more borrowings, compared with 15% who had reduced debts.
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.
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Loans 4 You of London Ltd
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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.
