Fri 30th Mar, 2007
Cost of Living Forcing People to Borrow Money
The tax burden on families is running at a record high, fuel costs are out of control, and interest rates are costing the average UK consumer one month’s pay every year.
The government claims the inflation rate is 4.6 per cent, but realistically, the interest rate is closer to 11 per cent.
Charities warned consumers that more interest rate rises, to counter inflation, will push many indebted households into insolvency. Households which only a year ago safely took out homeowner loans for improvements are now finding themselves pushed to meet repayments.
A spokesman for Citizens Advice said the charity is managing a huge increase in the number of cases it handles.
“It only takes a small increase in costs like mortgages and council tax to tip many more people over the edge into debt,” a spokesman said. “Any increase in mortgage interest rates could spell disaster for people whose finances are on the edge.”
Paul Dales, the UK economist at Capital Economics, said: “February’s inflation figures were particularly bad news for some middle class families. “Indeed, they may have seen their annual inflation rate jump sharply from 6.9 per cent in January to 7.6 per cent, driven by the upward impact on mortgage interest payments from January’s interest rate hike.
“With another interest rate rise lurking on the horizon, the inflation rate faced by some middle class families could yet rise further.” The Chancellor’s preferred measure of inflation, the Consumer Price Index, also rose from 2.7 per cent to 2.8 per cent.
Middle class families are losing hope. They are facing more and more obstacles that were not faced in previous generations – like financing children’s education and keeping their parents from going insolvent.