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UK Inflation Rate Signifies Bad News For Individuals With Poor Credit

by Jim ONeil on February 2, 2011

in uk loans news

The UK is currently experiencing record high inflation rates, due to fuel price and tax increases. This is troublesome for all residents but especially those with bad credit. It means they have fewer options to rid themselves of the mountain of debt they face. Experts predict that it will be even more difficult for anyone to get credit or consolidate their bad debt in the future.

Individuals who have unmanageable budgets and are grappling with bad debt will feel the most pain of inflation. Many lenders are already pulling their fixed rate loans and remortgaging deals, leaving only the less desired financing options. This is a warning sign of a February base rating increase by the Bank of England.

For 22 consecutive months, the Bank of England has kept the base rate at a very low 0.5 percent. During the past two years, the cost to take out a secured loan was much lower than to obtain unsecured

credit. This was a great situation for people who had substantial credit card debt. They could use secured loans to pay off their high interest rate credit card balances and repay the money at the lower rate offered by the loan.

As these secured loan deals are disappearing, individuals must resort to paying more interest to pay off their debts. Housing prices are again declining and people have less equity in their homes than they ever have. Some of these individuals have already used their equity to get themselves out of debt in other areas.

As the cost of secured loans increases, consumers are also facing the possibility of needing to pay more for unsecured debt. Deals are being put on hold and interest rates will soon increase. The money borrowed for lending will become more expensive, forcing many people to turn to debt management companies for assistance with debt consolidation.


Oh, give it a rest will you?


No, it is not correct. The increase in demand for money means a shift of the curve to the right.The increase in interest rate will cause a movement along the demand curve.

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