Borrowers on variable rates should be careful
July 4, 2007
Consumer debt levels in the UK have been a major concern for some years, and experts are now warning that consumers that have variable rate finance could soon find themselves struggling to keep up with repayments as interest rates continue to rise.
Since August last year interest rates have gone up four times by 0.25 percent each time, and the rate has gone from 4.5 percent to 5.5 percent during that time. Borrowers on variable rates have already seen their repayments rocket in some cases, and experts state that the situation is set to get worse before it gets better.
Many consumers that are in debt have variable loans, mortgages, credit cards, and other forms of finance. With each interest rate rise the repayments on these have risen, and with the Bank of England expected to hike up rates again in July those with variable rate finance will see their repayments rise again for a fifth time in the space of a year.
With bad debt reaching sky high levels already there could be may problems ahead in terms of further bad debt and even property repossessions, as homeowners struggle to keep up with mortgage repayments.
A spokesman from the London School of Economics stated: ‘Base rate will peak towards the end of the year at or close to 6%. As long as inflation is under control, it could come down in a couple of years.’
Another analyst stated: ‘Rates are going to go higher. A base rate of 6% is not necessarily the top. Borrowers should brace themselves for another increase. I would be surprised if base rate hit 7%, but not if it reached 6.5%.’
Many homeowners currently on fixed rate mortgages are also due to see their mortgage repayments rocket as their fixed rate periods come to an end. This could make a difference of hundreds of pounds to some homeowners, and could be financially crippling to the point where they can no longer continue to make repayments.
Alan Wright
4th July 2007
Related Articles
- Is it wise to remortgage to a base rate tracker? A number of experts are suggesting that homeowners and new property purchasers in the UK may be better off now looking at a base rate
- Keep your eye on what your lender does with interest rates Earlier this week the Bank of England announced that interest rates were being cut for the first time in two years, with 0.25% being shaved
- 7% available on some savings accounts There is good news for savers in the UK, with recent reports showing that interest rates on some savings accounts are the highest in six
- Savers also have to look out for effects of interest rate cut Earlier this month the Bank of England announced that interest rates were at last being cut by 0.25%, taking the base rate from 5.75% to
- Sub-Prime Mortgage Problems In The UK Five brokers who sell sub-prime mortgages are in trouble with the FSA. A review has revealed that some lenders and brokers are offering loans to
Comments
Got something to say?