Getting rid of our biggest household debt seems like a sensible plan to me and I’m being further convinced of the plan by talk of interest rate rises.
Just before Christmas, the US Federal Reserve increased interest rates for the first time in nearly a decade and where the US leads the UK, eventually follows.
The increase in UK interest rates is being pushed back due to the economy losing momentum but they will rise – with some experts predicting we will see a shift from the historic low of 0.5% at the end of the year and others believing it will be 2017. Either way, it’s coming.
With rising interest rates inevitably comes rising mortgage rates that will ensure more of our money is channelled into the bank rather than into our future.
Since we bought our first property in 2012 we have never experienced an interest rate rise but I’m not underestimating just how serious the impact could be.
However, I’m starting to think I’m alone with my concern as figures that came out last week from the trade union, the TUC, said unsecured borrowing on credit cards and personal loans is back to its pre-crisis level of £11,800.
We’ve become used to interest rates of below 1% but that isn’t normal. When the real normal of 5% returns, what will the consequence be? I don’t want to find out so am battening down the hatches in anticipation.
Am I right to worry, or do you think I’m over-reacting?