Why Base Rate Hikes Can Be Good For You
Base rate rises across board make many savers very happy as they experience some unanticipated windfall. As news of hikes filtered through the media, there were unease that the average debt-burden - particularly in the home loan lenders area- will even go further downhill. Neverthesless, savers are in for some very agreeable rates. For instance, the National Savings & Investment index-linked certificates which offer tax-free inflation beating returns, is now offering the highest ever rates on one year fixed-rate bonds - more than 6%. These sort or rates have been unheard of for some time now.
Savers generally will benefit hugely from this hike but more so those with index-linked accounts. Overall, investment rates have increased by a 1/4% to three-quarters of a percent across board. For those whose money in the bank is in tax-free accounts such as TESSA's or Individual Savings Acounts, the rates are even more attractive: some products on offer are currently offering as much as 9.75% on all accounts. On the face of it, an index-linked account is a good choice for savvy savers, however, a downward spiral of bank rate mean the rates plunge too. Mortgage holders who do not have fixed rates are probably the hardest hit by this rate increase. An average 100,000 mortgage will attract a further 68.00 This is quite hefty considering the current energy bill increases mainly in the natural gas and electricity sector.
Whether we like it or not, rate hikes has an effect on us all directly or indirectly. Cost to business increaseIt costs retailers much more to source their goods, as a result, they increase their prices. The domino effect happens as there is the sense of everything being expensive, thus consumers are reticent to spend fearing future implications. This in turn affects retail profits and the cycle continues. For the unlucky few, bankruptcy moves from being a possibility to a reality. Should this happen, the results can echo for several years. Insolvencies can be reported for a minimum of 7 years and sometimes even up to ten years. During this difficult time, acquiring credit can be very difficult and if obtained it is usually expensive. Low interest credit cards will become a thing of the past. To compound this, some energy companies require bankrupts to pre-pay their energy usage. Pre-paying for energy whether gas or electricity is without a doubt dearer.
If you are finding it difficult, you may realise that, making small but important changes can help improve credit history after interest rate rises. If you are on a variable rate for your mortgage for example, obtaining a fixed rate one is a wise move if the circumstances are right. Bear in mind that you may have to pay for chaning. Some creditors will charge you a certain percentage of your total borrowing if you opt out of your contract, whereas some may not charge anything at all. Other charges include arrangment fees which can be a hefty sum especially if the fixed-rate on offer is a bargain. You can also obtain a higher credit rating by paying bills on time whether it is credit cards or energy bills as well as mortgage.
To conclude, while interest rates increase may be beneficial to investors, generally they affect borrowers in a negative way and the consequences can echo for a long time to come, both in people's personal lives and businesses.