There has been much talk about the impact of rate increases on borrowers, who are generally people that are working and repaying debt (hopefully). It is certainly the case that the low interest rate environment may well have lulled some into believing it was always this way, anyone older than about 25 frankly should know otherwise.
There is a tendency to chastise people for “borrowing too much” when this subject is reported in the media. However consider for a moment a couple of facts. Wages have not increased very much over recent years, house prices have largely continued to rise, unchallenged, except perhaps to apply some nervous brakes due to Brexit. However as Kirsty and Phil would suggest, prices are reflective of location, location, location. People have had to borrow significantly to buy homes. Those without mortgages looking to move or simply sell are stuck in the same “market” one that is dominated by sentiment. Anyone that has bought property in the last few years will be aware of the pain created by a huge tax bill – Stamp Duty Land Tax (SDLT). This was used to attempt to control property prices from spiralling ever upwards, has it worked where you live?
The increase, if passed on, will create additional outgoings, just when inflation numbers appear to reflect what we all know – prices are rising. The stockmarket tends to do well whilst there is ample inflation, not always, but often. Inflation helps reduce the “real” value of debt, so Government may say they don’t like it, but it kind of does their job for them without even trying. Some will find life a bit harder, as of today or indeed most of the last 10 years, few people expect rates to increase dramatically and nobody is predicting interest rates that are high.
As I have said previously, clearing debt, however good the maths works for having some, has an emotional value that cannot be overstated. Ask anyone without a mortgage.
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