Personal debt is always going to be problematic. There’s no doubt that, for the majority of us, if we could choose to live a life without debt, then that’s obviously the route that we’d choose. Sadly, life doesn’t always work out like that. As wages stagnate in the UK, more and more people are having to turn to credit cards and loans just to be able to get through the month.
While debt has always been the cause of much chagrin, things could be about to get far, far worse for households who currently rely on credit to pay their expenses. Even if you just have a small, seemingly manageable debt, the UK is on the verge of tumbling into a serious problem with debt — so it’s time to take your management of your finances seriously.
What’s Going On?
Due in no small part to the financial aftershocks of Brexit, inflation in the UK has now soared up to 2.9%. That doesn’t sound too bad, but it’s a 2.7% rise over the past 12 months — which is very bad indeed.
To combat inflation — which is predicted to go higher — the Bank of England may be forced to raise interest rates. As reported by CNNMoney.com, the Bank of England is already struggling in the wake of Brexit and has cut its forecast; so the prospect of a rate rise is unlikely to be relished by many.
How Will It Affect The Average Person?
The one group who will benefit from an interest rate rise is savers. This is good news for savers, who will make more on the money they have set aside, but very bad news indeed for anyone who is paying back debts. Repayments will rise, costing more per month, and balances will take longer to clear as a result. This could also impact people’s ability to pay their mortgage, which is especially worrying considering many believe that UK house prices have long been inflated. As a result, as reported by nethouseprices.com, the risks of householders being left in negative equity is a serious concern.
What Should I Do?
If you carry a large amount of personal debt, then it’s worth looking to see if debt consolidation might be beneficial for you. Doing this now gives you a chance to take out a loan on existing interest rates, which will not change in the event of a rate rise. Wait any longer to do this and, if a rise does happen, you could pay a lot more to put your financial house in order.
What Happens If There Isn’t A Rate Rise?
Everything continues as it is for the moment. However, with interest rates already historically low, rates will rise at some point — so it’s best to be prepared for the moment they do. As Brexit progresses, financial instability is almost certain, so a sense of readiness will be hugely beneficial.
By focusing on the right now and seeing debt as an emergency, you’ll be in the best possible position — no matter what happens politically over the next 18 months.