Will the Bank of England (BOE) raise interest rates or will it continue to delay the inevitable?
This has been the debated question throughout most of 2014. As Great Britain heads into the new year, millions of consumers are concerned as to whether or not BOE Governor Mark Carney will raise rates or postpone it for another time.
A new survey released by the BOE suggests that more than one-third (37 percent) are betting on a rate hike within the next 12 months. In addition, if rates actually do ascend Britons are confident that the central bank will give them plenty of notice in order to make other plans and adjust their personal financial situation.
With that being said, some experts are urging borrowers to make some sort of contingency plan.
The BOE conceded that if rates were to jump to 2.5 percent then more than 600,000 families would struggle to pay their mortgages if wages were to remain the same.
“Overall, the evidence does not suggest gradual increases in interest rates from their current historically low levels would have unusually large effects on household spending,” said Carney in a statement.
The key question is: what about other indebted consumers? Rate hikes would potentially test the debt levels that households currently maintain when it comes to credit cards, auto loans and other forms of consumer debt.
According to a report by the Resolution Foundation (via Sky News), a 2.2 percent interest rate would seriously affect 2.2 million working Britons who earn below-median incomes because they spend at least a third of their incomes on housing and have just more than $100 left at the end of the month.
Also, lawmakers warn that consumers have certainly overstretched themselves since the global economic collapse as they have taken advantage of the historic low interest rates and have spurred their indebtedness.
“Interest rates have been so low for so long now that some might conclude this is the new normal. They shouldn’t,” said Treasury select committee chairman Andrew Tyrie in a statement.
We have reported regularly this year that the central bank has changed its mind on a couple of occasions: first, hinting at a spring increase, and then later confirming another delay.
