Still got debt? Then be warned: things will get tougher
The days of low interest rates are likely to be coming to an end sooner rather than later
Personal Finance editor
Saturday 29 June 2013
Mark Carney, the new Governor of the Bank of England, is spot-on in warning about the prospect of higher interest rates sooner rather than later.
The economy is picking up as are prices. Wages haven't followed suit yet but give it time. The simple fact is that the Bank is going to have to start weaning the British people off the opiate of artificially low interest rates.
Saying we have had record low rates of interest for the past four years doesn't actually tell the full story of the scale of the economic levers the Bank of England and other global central banks have been pulling.
In the 1980s the Bank's interest rate was routinely above 10 per cent. Since 2008 it has been at 0.5 per cent.
Of course, there is now a substantial disconnect between the Bank's interest rate and what lenders are actually offering to mortgage borrowers.
In pre-crash days the Bank rate was usually about 1 per cent or so lower than what you and I pay on our mortgage. Nowadays the differential can be anything from 2 per cent to 5 per cent depending on your credit record and financial position.
Nevertheless, mortgages are currently far cheaper than they were back in the 1980s and 1990s, and in some instances are now even below pre-crash levels, particularly in the fixed-rate marketplace.
So what have we been doing with this period of low rates? Well some who went into the crisis with a good cash and asset position have been filling their boots, acquiring more property and moving their assets around to take advantage of market opportunities.
In economic depressions generally the rich get richer in relation to the rest of the population; that is the way of things.
Those in the middle with some debt but more assets as long as they have kept their job have presumably done OK, perhaps taking advantage of cheap money in order to invest again in buy to let or at least pay down some more of their mortgage, increasing their asset wealth.
However, it is those with greater debt than assets who worry me. Although their finances have been propped up by low mortgages rates, it's probable that their real incomes have either fallen or stayed broadly the same since 2008.
As a result, they almost certainly haven't used the opportunity of the past few years to pay down their debts.
In fact one of the most striking things about indebtedness in the UK since the financial crisis has been how little of it has been paid back. In fact, many who should have been paying down their over-borrowing from the past decade have in fact been taking on new debt, admittedly at a lower rate than in the past but new debt all the same.
In truth I think as a country we have largely wasted the chance afforded to us by the central bank's low-rate policy to get our own house in order.
Now Governor Mark Carney is indicating that the rate largesse – which we mustn't forget has been so desperately punishing to older savers – will come to an end sooner rather than later.
I'm sure the bank won't hike rates to such an extent that lots of people start losing their homes – that would be counterproductive in the extreme – but be warned: if you thought the past few years were difficult for your family finances and you have persistent and high-level debt, then things are going to get even harder for you I am afraid.
Not sure about this but I had a press release this week espousing the virtues of cliff-top property.
The House Buyer Bureau, as it calls itself, said it has just bought a property within a “stones throw” of Ridgement House which hit the headlines recently for collapsing into the sea. I know that there is a shortage of property to develop in the UK but that sounds faintly ridiculous.
Apparently they got the property for £25,000 but what presumably is of real value is the plot of land it sits on. Anyone considering following this should be warned that they shouldn't expect to get a mortgage.
- 1 Games of Thrones actor Lena Headey makes emotional promise to her unborn daughter
- 2 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 3 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
- 4 Female Muay Thai champion hustles coaches to give them a beating
- 5 16-year-old girl beaten and burned alive by lynch mob in Rio Bravo, Guatemala
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof