The Bank of England has increased interest rates for the 14th time since December 2021, in an effort to bring down inflation. There is still an expectation that we are yet to reach the peak and there could be at least another two hikes this year.
This means that the cost of borrowing money continues to increase. For most people their main form of borrowing is their mortgage which will have become far more expensive every month if they have or are due to re-mortgage. Any personal loans, credit card loans or car financing has also become a lot more expensive. The culmination of these different factors means that people’s committed expenditure is increased and they have less money to spend each month.
The interest rates now available with banks have become more attractive but this becomes less useful for people when their ability to save severely reduced because their income no longer stretches as far. Sticking to your regular saving habits becomes more difficult and people often abandon saving completely when they already feel stretched.
When it comes to businesses, the increased cost of borrowing for them often means that they have to pass on their increased costs to the customer, which in turn makes most things more expensive. It ultimately becomes harder for the average consumer to continue spending like they have done previously as they have less disposable income and the cost of living remains high.
Making informed, smart decisions in more challenging times can be difficult but seeking professional advice can make all the difference – even with simplistic financial planning ideas, such as monthly budgeting.
If you would like to speak to us about how you can manage this situation more effectively, then please get in touch.
