When will the powers that be ever learn. The record low interest rate environment that has been created over the last decade is a ticking time bomb of issues for all of our futures, not just the next generation.
Recent stats released by the Office for National Statistics have shown that we are now a nation of borrowers. And for the first time in almost 30 years, we’re spending more than we’re earning.
This was a surprise to us given that before the financial crisis back in 2008, many seemed to be funding their lifestyle on credit - but apparently, we’re now in a worse state. And when looking more closely at the data, more disturbing figures come out. Short-term debt is soaring, surpassing its pre-crisis level. And although car finance is the fastest growing type of credit, payday loans have risen by nearly one-third in the last five years.
All of this is leaving us with less and less to save - so it’s little surprise to see that we’re depositing the least amount since 2011.
One thing to blame is low interest rates. By keeping interest rates low, you’re encouraging people to take on more cheap debt and fuelling the fire of people putting off saving money. The data does not make easy reading. It seems we are walking slowly into this ticking time bomb for funding our future and indeed covering our debts. The data highlights that we’re accumulating more debts than assets, which includes deposits, bonds, shares and, most importantly, pensions.
Last week’s base rate announcement is good news then, as a rise in interest rates may actually curb our enthusiasm to take out more debt and possibly encourage us to save more. Long may it continue. Of course, we know we’ll need more than just one rise in the Bank of England base rate to make a difference. Let’s hope there’s more to come. Sorry borrowers, I know you may not feel the same.
If you’d like to speak to someone about planning for your future, have a look and see if we can help.
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