BBC News – ‘Risk of debt peril’ when interest rates rise

[Legal Beagles]

A “relatively benign” rise in interest rates still has the potential to double the number of households facing debt problems, a think tank has said. A report by the Resolution Foundation said the UK had failed to deal with a “debt overhang”, leaving the economy vulnerable to rate rises. It predicted that by 2018, 1.1 […]

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[Mr $quandaŁot]

Re: BBC News – ‘Risk of debt peril’ when interest rates rise

The Government and Bank of England have failed miserably by keeping the base rate at all time low for far too long.

Many people are now used to the current rate, thinking that it is 'normal' when, in fact, it's the lowest since any records have been kept, some 300 years!

I am sure that the rates won't be increased until absolutely necessary. When this happens is anyone's guess, but rise they will.

Credit card interest rates have not been affected by the current policy, rather they have been steadily rising.

Mortgage holders should get themselves prepared. Especially in London, a Ł300k mortgage isn't unusual. A 0.25% rate on that would be Ł750 a year, or just over Ł62.50 a month. Paying extra now could save some money big time and a foreclo$ure in some cases!

[PAWS]

Re: BBC News – ‘Risk of debt peril’ when interest rates rise

Quite right Mr. S. I have never known rates to be so low for so long. I am old enough to remember the wildly fluctuating days and when you considered buying a house you had to factor in a significant rise when budgeting. Now, as you say they have remained low and steady long enough to fool people into thinking they can afford to take on a mortgage that could wind up costing them a lot more than they can afford.
I remember the horrendous rates of the late eighties and nineties. I also remember how the building societies took advantage by raising the rate as soon as the Bank of England did but not reducing it until sometime after they began to go down or in some cases not at all. We went from paying ata rate of 5 to almost 15% at one stage. That is a fair strain on any income. :fear:
I wonder if this report includes second mortgages or more accurately secured loans taken out to pay off other debts. I remember a few years ago the mortgage companies were ‘talking up’ the housing market saying‘business is booming’ at the same time the estate agents were laying people off and reporting a huge slump in sales. It turned out that a significant percentage of what was reported by the Halifax and others as straight forward mortgages to buy houses were actually second mortgages.
If this is still the case, and I have no reason to doubt it,then this would indeed be catastrophic.
Origin of Mortgage from the Oxford Dictionary:
Late Middle English: from Old French, literally 'dead pledge', from mort (from Latinmortuus 'dead') + gage 'pledge'.
How appropriate!:rip2: