Interest Rate Rise - Announced 11 January 2007
Perhaps this has come as a suprise to most people, but not so much to those of us who work in the debt industry. And my view is it won’t be the last we will see this year. For may people, the culmination of this coupled with the earlier rate rises may now lead to further cash strain within the family household budget, particularly for home owners.
If you feel that you are one of the many who are likely to be effected by these increases, you should immediately look at your finances to see whether economies are necessary and possible. List out all of your income, and deduct your usual household expenses including the mortgage, utility bills, housekeeping and clothing, personal expenditure and regular debt repayments. Make sure some provision is also made for contingencies such as house and car maintenance, medical expenses, childcare during school holidays etc. If your budget is tight, or at worst you have more going out than coming in, perhaps rearranging your mortgage to a part-interest only/part repayment may assist in the short term - although this will extend the repayment term accordingly. Seek specialist advice from a mortgage broker or your lender if necessary.
Beware the taking of secured or consolidation loans. They may prove to be a temporary quick fix, but the temptation may still be there to use the existing sources of credit again- thus causing what we refer to as the “debt spiral”. This can cause to more serious difficulties, at which time more specialist advice may be required. Try and not use additional borrowings to meet ongoing expenses. If you feel that this is the only option - it isn’t, and at that stage chat to a debt counsellor or insolvency practitioner - it won’t cost you anything and the advice may be invaluable in restructuring your finances.
