Pressure on interest rates stems from inflation

Many borrowers with variable rate mortgages or loans could see their monthly repayments rise over the course of this year, as the pressure is piled on for the Bank of England and the Monetary Policy Committee to increase the base rate in order to keep a lid on inflation. The level of inflation has now soared to 3.7 percent, which is close to double the target level of 2 percent as set by the government.

There are now concerns that the MPC will have to make the difficult decision to increase the base rate so that inflation can be brought back under control. The base rate has been at an all time low of just 0.5 percent for nearly two years now, and this has brought welcome relief to many people with variable rate loans and mortgages, as it has resulted in their repayments coming down.

It is thought that inflation could continue to soar, and this rise in inflation will not be helped by the increase in VAT, which rose to 20 percent at the start of this year reflecting an increase of 2.5 percent. A number of other things were blamed for the increase in inflation, including food costs,  higher utility bills, soaring fuel prices, and air transport.

One economist said: “Despite the undeniably significant risk to growth coming from the fiscal tightening that is now increasingly kicking in, there is mounting pressure on the Bank of England to enact at least a token near-term interest rate hike to send out the message that it has not taken its eye off the inflation ball.”

The British Chambers of Commerce warned: “Raising rates at a time when fiscal policy is being tightened, while businesses and individuals are facing greater pressures, would be a mistake and should be avoided.”

Tags: air transport, significant risk, inflation ball, relief, variable rate loans, target

Officials say mortgage interest rates must stay low

Earlier this month the Bank of England announced once again that the base interest rate was to stay at its all time low level of just 0.5 percent, where it has stood since the first quarter of 2008. This is the lowest level in the history of the central bank, which spans over three centuries. For many borrowers and homeowners this low rate has come as a relief, as it has kept down their repayments.

Economist from the Ernst & Young ITEM Club have now said that it is important that interest rates remain at this low level over the course of this year, despite the fact that inflation is spiralling out of control. Officials said that there is a very tough year ahead, but although many believe that interest rate will and should increase economist from Ernst & Young said that they needed to stay on hold.

The report that was released by the economists indicated that this year was going to be a gloomy, tough, and very challenging one, with inflation possibly rising to 4 percent as early as February. House prices are set to fall by 5 percent over the course of this year, according to the report, and only slight improvement is expected in 2012.

One economist from the Ernst & Young ITEM Club said: ‘It’s going to be a tense start to 2011. The fiscal retrenchment will keep GDP subdued while commodity price rises and the VAT hike will push inflation close to 4% and leave the MPC agonising over whether to increase the Bank base rate. However, it’s vital that the MPC stands firm. A premature rate rise would boost the pound, weakening the UK’s ability to increase its exports – particularly into the emerging markets – which we have long maintained hold the key to the UK’s economic recovery.’

Tags: lowest level, improvement, house prices, course, slight improvement, relief, mortgage, gdp

Drivers breathe sigh of relief over petrol prices

Over the past six months things have become more and more difficult financially for households in the UK, with a range of soaring costs making it harder and harder to make ends meet. Amongst the rising costs that consumers have had to put up with are rising energy bills, soaring food prices, and rocketing petrol prices. However, there is a little bit of good news on the horizon for drivers, and this is that petrol prices are at last starting to come down. Read more

Tags: bit, food, petrol prices, country, past year, relief, tough time, oil company giants

Your 100% savings guarantee could cover the first £50,000

Until late last year the government operated a savings guarantee of 100% on only the first couple of thousand pounds of a savers’ money deposited in a bank or savings account. However, the crisis surrounding the stricken bank Northern Rock changed all this. Following the onset of the global credit crunch Northern Rock, which was then the fifth largest mortgage lender in the nation, ran into massive funding problems and had to take an emergency loan of billions of pounds from the Bank of England. Read more

Tags: deposit, relief, money, savings, uk, good news, lender

Over half of Christmas consumers spend too much

More than half of consumers in the UK spend more than they can afford during Christmas, according to experts.

The figures from the Department of Work and Pensions show that 55 per cent of spenders over stretch themselves financially over the festive period.

Susan Clark, personal adviser at Jobcentre Plus, said that consumers should view their personal finances in the long term.

“Struggling to pay the bills after Christmas is a situation that many people find themselves in and it can be very stressful. Short-term fixes provide temporary relief but getting a job is the best way to improve your financial situation in the long-term,” she said.

People in London and the East Midlands are the best at planning their finances for Christmas whilst those in the North East are most likely to over spend.

Meanwhile, the Consumer Credit Counselling service has advised that those struggling with debt should avoid the January sales and concentrate on paying off them off.

Tags: jobcentre, adviser, cent, show, term, Jobcentre Plus

Some Brits could be in debt all of their lives

A recent report has highlighted how many consumers in the UK could be facing lifelong debts that will be with them for many decades as a result of high debt levels and low income.

Research was conducted by the Citizen’s Advice Bureau and indicated that many consumers in the UK could be facing debt for up to 77 years. This was based on the people that have been contacting the charity for assistance and advice in relation to their debts.

The debt mountain facing the UK has been the centre of concern for some years, and more and more people have been finding themselves unable to meet their financial obligations and having to find help. According the toe CAB the majority of consumers that made contact in order to get advice and help with their debts were, on average, around £13000 in debt, but were on just half of the national average income.

According to the CAB many of these consumers will face a lifetime of poverty, as they will spend many decades trying to repay their debts with a minimum income. The number of those needing advice and counselling for unsecured debts had doubled in the last eight years according to CAB officials.

David Harker, Citizens Advice chief executive, stated: “Low income, combined with badly informed and poorly understood financial decisions, are at the root of many of our clients’ debt problems. The reality is that they are condemned to a lifetime of poverty overshadowed by an inescapable burden of unpayable debt.”

The Cab is now looking to the government to put forward plans for solutions to these debt problems, such as Debt Relief Orders (DROs) which could help to ease the debt problems for those with high debt levels, low income, and nothing significant in the way of assets.

Tom Smith
28th August 2007

Tags: spend, orders, debts, relief, advice