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25% of UK Homeowners To Struggle With New Rate Rise

As widely expected, the Bank of England increased UK interest rates for the second time in three months from 4.75% to 5.0%. Having already faced a difficult financial year with increased utility and energy bills, approximately one in four UK homeowners now fears that they will have serious difficulties following the latest rise in interest rates.

Although the Bank of England’s announced rise in interest rates is going to further British household budgets, research by the Personal Finance Research Center at Bristol University said that it was more likely that only 1% of Brits would be affected by this modest rise in interest rates. More worrying to the team at Bristol University was the danger that Brits may lose their jobs in the coming months, with Elaine Kempson saying that: “Nearly three in 10 adults in the UK would be in serious difficulty if they lost the main wage in their family.”

Worse news could, however, been on the way with most industry analysts predicting that UK interest rates are likely to rise again in the early new year.

One area which does not seem to show signs of slowing down with the new rate rises of late is the UK housing market, which saw prices rise by 1.7% in October. With the Abbey’s recently announced five times earnings mortgage, and the possibility of obtaining 40-plus year mortgages, this trend may well be able to continue and sustained growth in the UK housing market is likely to continue onwards regardless. One area, however, where growth will not equate to good news will be in the rising number of insolvencies in the UK, and the announced confirmation that the UK’s base rate is to rise will surely be putting pressure on this sector as well.

As we move into the holiday period, with retailers looking for a bumper year to help them recover some of the lost earnings during the course of the year due to higher costs, the Bank of England’s rise in interest rates may just have done enough to make millions of Brits think twice before rushing out and buying lots of consumer products in the shops this Christmas.

Which, despite the retailers concerns, was partly why the Bank of England chose now, and not the New Year, to increase base rate to 5.0%. Nonetheless, with the current level of consumer debt in the UK, it’s hard to see how this rise in interest rates is not going to affect all of us Brits trying to live with rising levels of debt.

Richard Smith
13th November 2006


More Information:

  • Consultation Closes and Advisory Panel Announced
  • Why Does The Interest Rate Of Your Mortgage Change?
    The biggest difference between a mortgage and other types of loan is the fact that the interest rate changes throughout the term of the loan. Why is this? And which type of interest-rate arrangement is best?
  • What Is A Mortgage?
    With the price of property ever increasing and no sign of the long awaited bursting bubble of the housing market, we ask wht can young first time buyers do to gain their freedom and set up a home of their own in such an expensive arena and what is a mortgage anyway?
  • Choosing The Right Mortgage
    The market is flooded with different types of mortgages, but how do you know which one is right for you? The decision has to be yours, whether you take advice from an Independent Financial Advisor or do your own research.

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