Household finances hit by a number of rises
March 26, 2008
Since August 2006 things have gone from bad to worse for many households, with interest rates rising five times between August 2006 and July 2007, each time by 0.25%. This saw the base rate soar to 5.75% from 4.5% in this period, and many homeowners on variable rate mortgages struggled to find the money to meet their rapidly rising repayments, which in turn affected consumer confidence and had a knock on effect on the economy.
As a result of the slowing economy the Bank of England has now reduced the base rate twice in the past three months, taking it back down to 5.25%, although it has been a fine balancing act due to additional pressures with regards to rising inflation. However, although interest rates have started to fall homeowners are still facing a financial struggle, with a number of other cost of living increases to deal wit, which has limited the positive effect of the rate cuts.
Over recent months petrol costs have rocketed so consumers are having to pay far more to fill up their cars, and food prices have also been soaring, making the weekly shop more expensive. In addition to this energy prices have rocketed over the past few weeks pushing many households into fuel poverty, and water rates are set to rise in many areas. Council tax is also set to go up, although councils have stated that they have kept the rise as low as possible in light of the other rises that households are having to cope with.
However, although the council tax rise is set to be low campaigner state that many households could be pushed into the red with even a modest rise. Campaigners are pushing for the government to introduce a new system that will base the tax on the person’s ability to pay.
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