Economists in the UK are predicting that inflation could surge above 5% in 2022, and a tried-and-tested method to curb inflation is for the Bank of England (BOE) to raise the base rate beyond its current level of 0.1%.
But what would this mean to everyday customers?
Many public workers have had their pay frozen as a result of the Covid-19 pandemic, and NHS staff were rewarded just 1% rise, which was met with disgruntlement from union bosses.
Not all doom and gloom, HGV driver shortages have seen an increase in the wages being offered to try and drive recruitment. Lockdown caused a shortage of vehicle technicians, so that in itself has created a skills gap which has seen many companies offer their staff an annual loyalty bonus, and global retailer Amazon has introduced a joining bonus to encourage staff recruitment.
Mortgages on a variable rate are often linked to the BOE base rate, which means if it does increase then the mortgage payment will sadly increase too.
Utility bills are generally not linked to the BOE base rate, but rather are connected to inflation – if the cost of living goes up, then utility bills are often cited as one of the primary reasons.
In the UK a shortage of drivers and gas supply has seen the cost of energy soar and many smaller energy companies go out of business as a result.
Most secured loans like car finance have fixed rates of interest which are agreed at the start, so that basically means it’s not linked to any BOE base rate changes, allowing the payments to stay the same during the full duration of the loan, even in the case of those on a plan affected by bad credit.
Sometimes, financial planning can be difficult to predict – with increased utility bills, inflation and interest rate rises putting households under pressure, missed or late payments, or even defaults can occur.
This does, unfortunately, get registered on your credit file, which is still the primary resource companies use to make credit underwriting decisions.
Can I Borrow If I Have a late payment?
Late payments can affect future borrowing, but with secured purchases like car finance, most companies operate on a rate-for-risk basis, so they link the offered rate of finance to the amount of risk they think the applicant possess.
As we have seen recently with the collapse of many energy companies, uncertainty can affect business too, so they try and balance between saying yes responsibly and protecting their ability to trade in the future.
Some would say It may be a good time to consider car finance before the Bank of England increases the base rate.
As previously mentioned, the interest rate will be set at the lower amount and will be fixed during the term of the loan, which means the payments won’t go up and, with many companies adopting a soft quotation search, it doesn’t affect your credit rating, so it may be worth considering.
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.