Rate Increases Leave Savers Happy

The new year has ushered in new interest rate hikes which is good or bad news depending on your financial standing. As the rate of inflation rises, the the Central Bank has been forced to raise the base rate by a quarter of a percentage. This was unexpected, as rates were raised at least once towards the end of last year. It seems that made no impact on borrowing - particularly home loan lending - and spending which affect inflation thus the need for a another rate hike in such a short while.

This unforseen rate rise is welcome news for savers with money in the bank, especially those with index-linked accounts such as ISAs and TESSAS. Index-linked savings accounts yield the most when rates rise. The disadvantage here, as expected shows up when rates are lowered. With this latter increase, some of the rates on offer and indeed good, some nearly 10% for high rate taxpayers and up to 8% for base rate taxpayers. Saving in ISAs are tax-free and you get to save a fixed amount every year. Interest is added each month depending on the prevailing rate. The more income is added each year, the more return on investment the account holder receives. Ordinary savings accounts have also benefited from this rate rise but not as much as their index-linked counterparts. An average of 0.30% to 0.55% has been added by banks to their rates.

Although, raising interest rates has positive points - such as cooling the economy - , it is more of bad news than good news for the average credit consumer. Already, some retail shops have suffered over the Holiday period as the consumer reigned in due to higher bills and expenses overall. Insolvencies are on the up as inflation rates combined with a variety of factors have forced small businesses out of the market. Business insolvency is dwarfed by the number of private liquidation. Going broke can be very trying both for businesses and individuals. Even when the ordeal seems at an end, a record of it is available on your credit history for 7 years or more. This means that during this period, most major lenders will decline giving you any credit including car loans leaving you to the vagaries of loan sharks. Even low interest credit cards can prove elusive.

Should you find yourself in an impossible postion after a rate increase, a good "do it yourself credit fix" plan can make all the differencemaking the circumstance much more bearable in the future. Salvaging your credit, if done legally, is not instant action, but rather a painstaking process. An option is to hire an attorney to fix this, however, it comes at a price and unless there are inaccuracies on your free credit report, it is debatable whether they can make a real difference. Credit score can be rebuilt slowly by doing small but meaningful things like paying your energy bills on time, honoring your credit card payments as soon as bill is received, making credit bureaus to report positive items on your credit report if some of your creditors do not report to them.

Bottom line is that, while interest rates increase may be advantageous to investors, generally they affect borrowers in a negative way and the consequences can echo in future months and years, both in people's personal lives and businesses.