A lot of people throughout the United Kingdom have already fallen into debt while many others are struggling to make their income go as far as it needs to so that they don’t. The one thing which is keeping many people out of debt is the current interest rate level for mortgages which is reasonably low. Unfortunately though these rates will soon be increasing and so those already struggling are likely to start to struggle a whole lot more.
This speculation has come as a result of Halifax writing to its borrowers and informing them that they were increasing the cap on the standard variable rate. Before the recent recession and credit crunch Halifax were the biggest lender with regards to mortgages and so there are a large number of people who will be affected by this. Halifax has stated that they will increase their standard variable rate from three percentage points to 3.75.
This increase will mean that Halifax borrowers will be paying much more on their monthly mortgage payments than previously. Halifax’s increase is also suspected to spark a raise from most other lenders too who will take the actions of Halifax as an invitation to up the rates of their own. RBS have already done just this by upping the rate on three products of their own.
Mortgage lenders claim that the reason they have to do this is because they can’t keep up with the original rates which they offered to their borrowers. The cost of borrowing has gone up for the lenders themselves because of a struggling economy in recent years. Lenders have already reduced their own profits to maintain the original rates however they claim that they can’t absorb any more of the borrowing cost and now need to pass it onto their borrowers.
If these planned increases continue across mortgage lenders throughout the United Kingdom it is likely to mean that millions of people will be paying increased rates. These increased payments could well mean many more people being unable to manage financially and falling into debt.