… for a second time in less two months! The direction was only ever going to be upwards (in my opinion)!
Of course, the new Health and Social Care Levy coming into effect on 6 April 2022 means people are already going to be left with less disposable income at a time when the cost of living is rising! To top it up with an increase in interest rate is likely to result in dire consequences, especially for those on low wages.
With lower take home pay, daily living expenses are bound to be unaffordable – gas bills (which is also on the up!), food bills, transport cost/fuel for cars (all of which are bound to increase!). Despair and worry for all about what lies ahead.
The Chancellor of the ex-Chequer has offered a few initiatives to help ease the pressure on those mostly affected (a repayable discount on energy bills, a rebate on council tax bills). Despite this though, the pinch would be greatly felt across all spectrums of life.
Could the tough times ahead bring with it similar situations as the 2018 financial crisis, albeit to a smaller degree e.g. people on variable mortgage rates (or those whose are the tail end of their fixed rates) find themselves unable to keep up mortgage payments as rates rise, stock markets crashing (we already seeing some of this), house prices falling, etc.
For those with other debts e.g. credit card or bank loans which aren’t on fixed interest rates, those will also be affected as repayments would go up!
What about business owners, start-ups particularly; could this mean less funding available for them at a stage of their business where they require funding most? This will have a squeeze on cashflow, especially for those using variable rate loans! Could it mean businesses crashing as everyone becomes more frugal with their spending?
Frugal spending is the aim of the interest rate hikes right? It will help bring down the inflation rates, but what would it do for the economy in general? Food for thought! It’s a catch-22 situation, I’d say!
Three things I suggest are critical to do now which I believe will help minimise the impact of any future interest rate rises are below.
- Cut/eradicate debt from your funding strategy.
- If you must use debt, fix the interest rate.
- Savers should take advantage of any increased interest rate passed on, by shopping around and moving their money into accounts offering better saving rates.
In my opinion, this is only the beginning of the interest rate hikes, so to stay afloat more frequent review of personal budgets and business forecasts are required.
Send an email to hello@bancservices.co.uk if you require an independent review of your business finances.