The last time interest rates went down was in August 2005. They were set at 4.5 percent and stayed there for a year before going up by only 0.25 percent, which is a small increase but still a big one. This was the first of four times in a year that the interest rate went up by a quarter of a percent.
With the Bank of England base rate now at 5.5 percent and predictions of more interest rate hikes, it's hard to believe that rates were as low as 4.5 percent less than two years ago. Even though it may not seem like much compared to the bad times of the late 1980s, the economy is very different now.
Personal debt, like mortgages, is higher than it has ever been, and more and more people are having trouble paying their bills every month. Statistics show that most people have a very tight budget, and each month, hundreds of thousands of people have trouble paying their bills.
An increase in interest rates can completely throw off this balancing act with money. Even a.25 percent change can throw everything out of whack.
When your debt starts to get out of hand, it can be tempting to take a break from your mortgage. However, just one missed mortgage payment can start a downward spiral that can have serious effects on your financial future, your ability to get credit, and even your health.
If you miss a mortgage payment, you are in mortgage arrears. If you don't pay off your arrears right away, you will still be marked as being in mortgage arrears even if you keep making your payments as usual.
Even if your lender is understanding, you have broken the terms of your credit agreement, so they have the right to send you a demand for payment and, if you still can't pay, a "Claim Form" that gives you 14 days to pay or write a written explanation of your position.
If you don't fill out the claim form or go to court when you're supposed to, you'll get a CCJ, which will stay on your credit report for six years unless you pay it off in 28 days.
If you still can't pay, you could get a possession order or even a warrant to get you out of the house, all because you missed one payment.
The main piece of advice here is that if things are getting out of hand, you need to act right away. The smart way to do this is to act as soon as a rise in interest rates threatens your financial stability. Instead of missing a payment, you could call a company that specialises in remortgaging to quickly set up a new mortgage and even use the value of your home to get some extra cash.
The good news is that, even though interest rates have been going up, they don't seem to have had much of an effect on house prices yet, which are still going up by about 10 percent on average every year. That means that even if you are having trouble paying your bills, you may be sitting on money that could make your life a lot easier.
