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Hard working families will be affected by the recent increase in central interest rates. This is likely to cause them further unwelcome frustration from the already hard every day life. New interest rates will mean that their mortgage outgoings will increase for no fault of their, leaving less money in their pockets. If they rent the house then their rentals expenses will ultimately go up too. They simply mean higher rate of borrowing which affects almost every one who live in the modern world. High interest rates are never good news for any one. Those who do not borrow and rely on their own savings rely on services or businesses who borrow. With increase in interest rates, cost of services has gone up which are eventually passed on to individuals. Take jobs for example. If you are employed by a business then that business most likely has borrowed money from their bank too. They also use services, like electricity, oil, petrol etc. That means that an increase in cost of borrowing, all these services must cost more. Some companies can pass on the higher cost to its customers straight away but others must wait for a little while. Eventually these costs are passed to the end consumer. If costs can not be passed on sooner, companies bear that cost. This is when people start loosing jobs because companies start downsizing. Controlling inflation is generally the main reason why central banks increase interest rates. Inflation is generally considered a bigger evil than higher interest rates for the long term health of wider economy. It is inevitable that some people are worst off in this deal than others. Over the last few years, housing market has gone wild at the back of historic low interest rates. With the rise in interest rates, housing market has started to cool down. With increasing interest rates now, it is going to be difficult for sellers to shift houses because many buyers have started to believe that housing market has peaked and prices are likely to start coming down. This has made people to consider options to sell house fast and for cash. Rising interest rates for those working in cost sensitive industries is worrying news. Many people believe that these interest rates are more than likely to go up before they will stabilise and start coming down, increasing the fear of house repossessions. Experts have voiced their estimates at as high as 6% in UK. This will raise the mortgage interest payments for an average family house to more than 100 pounds per month. So what is the learning point here - start to get used to slimming down those unnecessary expenses and start to put some money aside because you are going to need it.
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