Although pure speculation, the Times on Sunday chief financial editor suggest that by December 2011, interst rates will be 1.5% and on an upward curve.
That translates to an extra £100 per month on an average £150,000k mortgage. Even with overtime, I will struggle to meet that extra expenditure and maintain my IVA payments.
I've no idea until it happens and then would hope that IP's would possibly have a bit of discretion in respect of payments maybe? I do pay a little extra to what I should do because of low interest rates at present. A lot of us are going to affected of that I'm sure if or maybe when they do go up. x
IVA final payment left the bank on the 26th January 2013...looking forward to a debt free future.
With GDP being in negative territory this month it may mean that the rates stay low for longer.
I think a lot of us though will be contacting our IPs when the time comes.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
The amount of times George Osborne mentioned the weather yesterday was unbelieveable! Didn't matter what questions were put to him.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Raising interest rates to prevent that leap in inflation would have squeezed living standards even more, by hurting growth. To think otherwise was a delusion. Mervyn King
I think that tells you what they are thinking. Borrow at 0.5 % and lend at 16%
It's hard to see how raising interest rates would actually have an impact on inflation when disposable incomes are being squeezed and average personal debt levels are reducing. Spending by the UK public isn't driving inflation.
An IP well known around this forum was speculating (when I spoke with her today) that IVA creditors might have to take positive steps to enable IP's to manage this situation if/when it happens. After all, they're not going to want tens of thousands of IVA variations landing in their mailboxes if and when it becomes necessary.
Andrew Graveson
Bright Oak Ltd
UK Debt Management Company
Website: www.brightoak.co.uk
That is great to hear Andrew, that IP are already considering what is bound to be an eventuality.
Hopefully creditors will use some common sense here. When I took out my IVA mortgage rates where at an all time low which meant I was paying £300 less than 3 years previous. So if I had had my IVA 3 years earlier I would have been paying £300 less!!
Just hope they understand that people recently signed up to an IVA recently are victims of timing and they shouldnt be punished more than those that signed up early with higher mortgage payments already include in their original expenditure.
We always highlight this as danger area to all of our homeowning clients who are not on fixed rate mortgages, but most people tell me that they have a contingency in place or will simply take their chances. I am sure that HMG do not want to see an increase in home repossessions or bankruptcies, so some relief will need to be invoked in my honest opinion.
I've always been on a variable rate, which has worked for me so far in my IVA and I'm almost three years in now.
I'm not looking forward to the rates going up and of course there is also the secured loan. We've been lucky that the rate has never altered so I hope it stays that way.
Think there might be a bit of belt tightening when things do start to alter!
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Andrew makes an important point that simply raising interest rates may not have an immediate effect on inflation. This is because many of the price rises are being driven by rising costs abroad (ie the rising cost of commodities such as oil) which UK consumers have no influence over.
However, I feel that there will nevertheless be growing pressure on the Bank of England to raise rates sooner rather than later or they will be seen as losing their grip. Just yesterday we saw that now 2 of the 9 Monetary Committee Policy members voted in favour of raising rates when it has been only one for months.
I am not a betting man but I predict that we will see a rate rise by the summer. I would think that it will only be a quarter or max half a percent but even quarter of a percent will add c£30 a month to a mortgage of £150,000. This is going to put some people who are already struggling to make their IVA payments under even more pressure I'm afraid.
It is all relative of course. A 1% increase in rates if rates are at 10% is proprtionately much less painful than a 1% rise if rates are 5%. With rates being at an all time low, though you certainly wouldn't notice it with the cost of borrowing from some lenders I could mention, any increase is bound to be painful. My own guess is that rates must rise, it is just a question of when and by how much. I am with James in that any rise will be, in my opinion, limited to 0.25%, but I don't think there will be just one. By this time next year I would not be surprised to have seen 3 such rises.
Some lenders may try to absorb some of the rise(s) to help their customers, but I wouldn't hold my breath. Of course, the effect is not just on mortgages, the cost of other borrowing will go up as well, and the squeeze put on budgets will undoubtedly lead to a rise in the number of people who will be then fighting a losing battle on their unsecured debts and seeking professional help.
This may be a very bumpy ride.
Regards.
Cert DR
23+ years in debt advice
I do not post for anyone other than myself
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Raising interest rates will not damp down inflation as the others have said. However, what it would do is improve the return to savers whose deposits are being eroded.
I personally think the government are privately happy with low returns on savings and relatively high inflation. The advantage to the government is that inflation actually increases their VAT take and government debt reduces as proportion of GDP. Savers lose out as the value of their investments is eroded but anyone in debt [including the government] benefits.
Not that anyone would admit this but I do think it is part of the long term recovery plan.
