Tag Archives: Credit

Should Consumers be Prepared for a Base Rate Rise?

interest rate riseThe Bank of England’s Monetary Policy Committee (MPC) has once again chosen to keep the base rate at its historic low of 0.5%. The latest predictions suggest that the rate could now stay there for another year before finally rising from the low point it has maintained until 2009. Nonetheless, the latest vote has once again raised concerns about what the impact will be on consumers when the rate finally does increase, and questions about how much preparation the average consumer should do.

Concerns relate to the section of consumers who have debts, and most particularly mortgages. The long period for which rates have remained at their lowest ever level has led to a large number of mortgage-holders in the UK who entered while rates were affordable and have never had to face an increase. There are fears that this class of borrower may have become complacent and be ill-prepared to afford increased repayments when rates do eventually pick up.

There are also concerns about the way this could impact the wider national economy. With households having debt worth 135% of their total income and rising and higher levels of unsecured borrowing than before the financial crisis, many experts believe that the section of the population that is most vulnerable to a rate rise could also have enough collective debt to create serious national economic repercussions. Other experts, however, point out that while the size of the average mortgage is higher than pre-crisis levels, this could be offset by the fact that the percentage of households that actually have a mortgage is lower than it has been for some time.

On the individual level, the size of the impact that a rate rise would make on any given person or household is heavily dependant on circumstances. However, it is unlikely to be disastrous for the majority of people, especially given the Bank of England’s caution in introducing a rate rise and their recently-repeated intention to roll out increases slowly. Recent research suggests that the average consumer is well-positioned to deal with this kind of gradual rise. Those who have stretched their finances as far as possible to secure a mortgage they can only just comfortably afford may find themselves strained, and those who are already seriously struggling with debt will find it hardly helps their situation. For most borrowers, however, it is likely to be more an inconvenience than a big financial burden.

Nonetheless, this does not mean that being prepared is a bad idea. Whether current predictions that a rate rise will take place in about a year’s time are correct or not, at some point the base rate will increase. If you are at all concerned about the affordability of your mortgage or other borrowing should rates increase, then have a look at your situation and work out just how much you could afford and where you might be able to find financial leeway if necessary. Whether you are actively concerned or not, you may wish to consider remortgaging while rates are still low if you have the option, thereby securing yourself current rates for a longer term with your new deal.

A Few Credit Recovery Tips

Your credit rating is a reflection of your spending and financing behavior as well as your financial discipline. Having a good credit rating is important to take out crucial financing that you will need and gain all the privileges that can save you much money in the future. It is inevitable to make mistakes and have a failed credit rating from time to time, but recovery is simply easy through these simple steps.

1. Debt Consolidation

Having great debt is a great hassle, but it can also be turned to a great advantage. It can serve as a springboard to a better credit rating. By practicing proper debt consolidation techniques or having debt consolidation companies help you repay your debts without problems, you’ll find that your credit score can rise faster than you imagine it.

2. Credit Cards

The sneakiest way a personal bankruptcy can get to you is through your credit cards. Credit cards do not indicate to you how much credit you have left. Oftentimes, customer max out their credit cards lacking the knowledge of how much they’ve used it. Keep tabs on your purchases and only use your plastic card for things you need, not things that you want. A good advice is to withdraw money and use cash, or use your debit card instead.

3. Financing

It’s hard to get financing from a bank especially with a bad credit rating. However, if you want to recover from your credit score and still have adequate financing for your needs, you can work with credit unions. Credit unions work differently from banks, so it would be wise to know more about them. One thing’s for sure: they don’t regard your credit rating for financing.

4.Small Credit Payments

If you still have “free cards” i.e. cards that are still debt-free, use them and make small purchases that you can instantly repay per month. Using and paying off the card in full improves one’s credit rating.

5. Goodwill Adjustments

This is a more personal case of debt consolidation. When you have missed just one payment for your credit card or financing, you can ask your creditor or lender to provide you a “goodwill” adjustment. This means that they don’t have to report your mistake as long as you can pay off the entire thing along with the next repayment by the deadline.

6. Pay Your Bills On Time

Punctuality is certainly a value in financing. So make sure you always do.

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