Interest rate increases will mean paying out more on debt

Industry officials have said that increases in interest rates over the next four years will result in families having to find more money every year to make increased payments on debt such as credit cards, loans, and other forms of finance that are based on variable rates. This could result in families having to find a whopping £1800 a year more in order to deal with the increased interest on these debts.

For nearly two years now the base interest rate has been at an all time low of just 0.5 percent, and this is he lowest it has been in the history of the Bank of England, which spans over three centuries. However, inflation levels are now soaring and many industry officials now believe that the rate of interest will have to rise over the course of this year in order to keep a lid on inflation, which could mean more financial hardship for many households.

There are a number of experts that think the rate rises could start by this summer, which means that households would have to cope with additional interest on their debts as well as higher living costs and increased VAT, which went up by 2.5 percent at the start of this year. Mortgage payers will also be affected with extra payments, which could leave many on the financial edge and put them at risk of missed repayments.

The Bank of England said: “Currently, around two thirds of outstanding mortgages in the United Kingdom have floating interest rates, somewhat above the average over the past five years. That proportion is rising as mortgagors move on to standard variable rate products as existing fixed-rate deals expire. This exposes more households to the risk of increases in interest rates.”

Tags: United Kingdom, year, households, lid, interest rates, Loans, variable rate products, GBP