Interest rate rise reaction

The Bank of England yesterday (July 5th) announced another 0.25 per cent increase in the base rate, taking it to a six-year high of 5.75 per cent.

Mortgage holders, credit card borrowers and those with loans will be hit hardest and many industry figures are warning of the implications of the rise.

Citizens Advice warns that many people will be adversely affected by the rate rise and says that it has seen an increasing number of people visiting its local bureaux after falling behind with mortgage payments.

It says that the rate rise will tip over the edge those who are just about struggling along and is calling upon lenders to be sympathetic to their borrowers.

Despite the dangers associated with a base rate increase, many first-time buyers (FTBs) will not be deterred from trying to get onto the property ladder.

That is according to new research by Bradford & Bingley that shows 46 per cent of FTBs are concerned that house prices will become even more unaffordable in the future and so do not want to wait.

Many industry figures are predicting that the Bank of England will announce a further rate rise before the end of the year, taking the base level to six per cent.

However, this could lead to further criticism from many, with Scottish Widows Investment Partnership already saying that a further rise is unnecessary as it expects inflation to fall in the coming months.

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OFT bank charges study welcomed

The announcement by the Office of Fair Trading (OFT) that it will be launching a study into bank charges and the perceived effects of the loss of free banking has been welcomed.

A number of organisations have come forward to welcome the decision which many hope will change the way in which banks treat their customers.

Citizen’s Advice (CAB) has backed it, saying that bank charges for unauthorised overdraft use punish the most vulnerable in society.

“We welcome the further work being done by the OFT concerning bank charges,” said Tony Herbert from CAB.

“Evidence from local bureaux shows that bank charges have a disproportionate effect on people already on low incomes; one charge may be enough to push them into the red and keep them there, incurring more charges that push them further into debt.

“It’s like running up the down escalator – you’ll probably never reach the top,” he added.

The British Bankers’ Association (BBA) has also given its support to the new study, welcoming the OFT’s realisation that the issue of charges is a complex one.

However, the BBA says that it “continues to believe that the fees are legal”.

Tags: organisations, Law Crime, bank, tony herbert, local bureaux