Since the middle of 2006, when interest rates started to rise, many people have found that their finances have been suffering more and more. Homeowners on variable rate mortgages saw their repayments and interest rates rise five times between August 2006 and July 2007, and this resulted in many people struggling to meet their repayments, which saw the level of repossessions rise.
Many thought that the recent interest rate cuts would help to ease this situation, and with the economy taking a real hit due to low consumers confidence and financial worries, the Bank of England recently decided that it was time to cut the interest rate in order to try and ease the squeeze on the economy. However, although the Bank of England cut the base rate by 0.25% in December and then by a further 0.25% in February, it seems that things just aren’t getting any better for households in terms of their finances.
The old adage ‘in one hand and out of the other’ comes to mind with the current situation. It seems that every time we think that the financial situation is set to ease something else comes along to make sure that finances remain strained. Following the announcement that interest rates were to be cut for the first time in two years in December energy firms announced that the cost of gas and electricity was to go up in January. Despite soaring profits big name suppliers hiked up the cost of energy usage as promised, blaming increased costs of wholesale energy for the move.
One campaigner said: ‘It’s quite sickening when companies make these huge profits while, at the same time, we are expecting 25,000 excess winter deaths as a result of people not being able to keep warm.’ Another added: ‘These companies are making very healthy profits for shareholders but they are not healthy for customers.’
As if this wasn’t bad enough, bad news also followed the announcement of the February interest rate cut, with water suppliers announcing that bills could be rising by up to 9% in some cases, with the average rise set at 5.8%.
An industry official said: ‘With household bills generally going up - including increases in energy and council tax - we are aware that bill increases are difficult for some customers. These price rises are essential to enable companies to continue to provide high-quality secure water and sewerage services both now and for future generations. The increases also go towards significant improvements to protect the environment.’
Add to this the current cost of petrol and food, and household finances are left in a very sorry state in many cases. The government has also announced that council tax bills will be rising, but added that it had tried to keep the rise as low as possible given most people’s financial situations. The rise is said to be the lowest in fourteen years for council tax, with the average rise equating to under 4%.
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