Financial illiteracy of the British could lead to massive defaults in mortgage payments

The January is traditionally a month of summing up the past year and bring finances in order, making plans for the new year. Meanwhile, a study conducted by Barclays Bank, jointly with the Centre of Economics and Business, showed that many UK citizens have a very vague idea about what the current base rate of the Bank of England, despite the fact that many already pay a mortgage and a very large part of UK citizens are going to take a mortgage loan for the purchase of property in 2015.

About 46% are not aware of what the current bid and 88% of respondents have no idea about what announced the rate increase in October 2015. Approximately half of respondents are not aware of the fact that the size of their monthly payments on the mortgage loans may increase if the rate of the Bank of England will grow. This lack of awareness can lead to the fact that the majority of borrowers simply will not be ready to increase the expenditure side of its budget.

Already calculated that the increase in rates to a record low of 1.25% from the current level of 0.5% would lead to an increase in the average monthly mortgage payment of £118,95 pounds. If the rate increase by the Bank of England will go for the moderate scenario and the rate would be raised by 0.25 %, the burden on families will increase by £101,33.

However, an overwhelming number of Brits do not even care about this kind of problem. They do not save money and not trying to shrink their expenses in anticipation of increasing rates. This kind of financial ignorance was a cause of concern for banks and for government. Many families lived at the limit of their financial capacity and even a small increase in the financial burden can lead to significant zalojennosti and failure.

Before the Bank of England will raise the base rate needed to conduct a massive outreach to prepare people for the increased financial burden on the family.

® Maxim Savitsky. 06.01.2015 G.

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