Although Britain central bank has maintained its interest rate low since March 2009 at 0.5%, but that may not stay longer. Bank of England may increase interest rate following the certain economic condition. However, certain people may not be ready for interest rate hike.
Business Insider reported that according to Money Active Trust, 40% of people are not aware that rates may rise indicating they are likely to not be prepared for an increase in debt payments — especially if you're a homeowner.
Money Active Trust is an independent charity organization established to assist people in U.K. to increase the quality and availability of free, independent money advice to people with debt problems. It was founded with the support of Government, creditors and the advice sector more widely.
Joanna Elson, CEO of Money Active Trust in an interview with BBC Radio 5 Live, as quoted by Business Insider said, "We are worried about people who are already in financial difficulty because by definition if credit is more expensive and they already have credit commitments then that's going to be an issue for them."
"But there's a broader issue about preparing everybody because even people who aren't in financial difficulty have got used to low rates," she added.
Britain has kept its low interest rate to stimulate the economy by lowering the cost of borrowing. A small increase of interest rate in Britain will impact homeowners, those in debt and cost of food and energy bills.
The plan of interest rate hike was first suggested by Finance Minister George Osborne last week. In an interview with BBC Radio, the minister expected the Bank of England to follow U.S. Federal Reserve increasing the interest rate, because Britain ecnomic recovery is not fuelled by consumer debt. As quoted by Reuters, the minister said, "Of course, there will come a point when that happens in Britain, a decision made by our independent central bank. Rising interest rates can be a sign of a strong economy..."
Interest rate hike in Britain was also be triggered by a plunge of poundsterling against dollar at the lowest level in more than five years on Tuesday. Also the decline of manfacturing product of 0.4% according to Office for National Statistics (ONS) as reported by The Daily Telegraph,
Slump of poundsterling and low manufacturing production performance raised concerns that the UK economy will not be healthy enough to sustain an interest rate. George Osborne warned that UK faced a "poisonous cocktail" of global risks. In his speech last week in Cardiff, he said UK will face a potential difficulties in 2016.
The interest rate hike in Britain seems inevitable, as the global economy will enforce Bank of England to increase rate. This may be shocking to some people, who had been so familiar with a low interest rate for years.
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