Aug 8, 2006

Lisa Taylor, an analyst from moneyfacts.co.uk, has expressed concerns on the effects the base rate rise may have on UK consumers, especially those who have borrowed to the max and don’t have the comfort of a fixed rate mortgage.

Taylor pointed out that UK consumers are facing a bleak future, with rising bad debts, unemployment levels, unsecured debt levels at an all-time high, and predictions of a further rate increase that may occur before the end of 2006. With LloydsTSB, HSBC, Barclays and HBOS all reporting increased levels of bad debt amongst their customer base, Taylor says the interest rate hike, combined with heavy increases in the cost of petrol, gas and electricity, will see more consumers struggle to manage to meet their financial commitments.

Moneyfacts published a table that highlights the impact that rate increases could have on a consumer’s mortgage payment. “Assuming a current mortgage tracker rate of 4.5% (prior to 3 August), a rise of just 2% would increase the original payment on an average mortgage of £150K (capital repayment) over 25 years by over 20 percent,” Taylor explains.

Source: moneyfacts.co.uk, 3.08.2006

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