Income and outgoings set to cause consumers problems
September 22, 2008
The governor of the Bank of England, Mervyn King, has recently highlighted how below inflation wage rises coupled with soaring food, petrol, and living costs are set to cause many households severe problems over the foreseeable future. Mr King warned households in a recent speech to brace themselves for some of the most challenging times that many may have yet faced in terms of their finances, with outgoings set to far outweigh income levels in the current economic climate.
There are a number of issues that were brought up by the governor in his recent speech at the Mansion House, but the crux of the matter was that whilst income is set to rise below the rate of inflation, bills, living costs, and borrowing costs are set to rise at much speedier levels, which could see many households struggle more than ever to keep on top of their finances. This is a stark warning to households throughout the UK to brace themselves for some of the most challenging times of recent years.
King made a number of warnings in his speech, one of which was that the Bank of England was prepared to take whatever action was deemed necessary to bring inflation levels down. The rate of inflation has soared to 3.3%, and with the government target standing at 2% it has clearly spiralled out of control. In order to try and bring inflation back towards target the governor has indicated that the central bank will have to put a hold on interest rate cuts, and this could further affect household finances, which could become even more strained.
King also warned that wages will rise well below inflation levels, and this is a warning that was echoed by the Chancellor of the Exchequer, Alistair Darling. However, some unions have said that they would prefer to take strike action than to have to accept wage rises that are below the rate of inflation given the rate at which other costs are rising, and this could bring about mutiny in terms of strike action amongst various industries.
In his speech at Mansion House, the chancellor stated: ‘To return now to inflationary pay settlements would undermine rather than raise living standards with a damaging circle of wage increases eroded by steadily rising prices. We must never return to those days.’
He also insisted that the economy is set to grow, dismissing claims that the UK is actually on the brink of recession, as many industry officials have stated.
With consumers seeing bills, petrol costs, food prices, and various other living costs rising, it has become difficult for many to keep on top of their financial commitments, and if wages continue to rise at below the rate of inflation this could cause serious problems for many households, many of which are already facing problems such as repossession as a result of being unable to keep on top of repayments on their mortgage due to high interest rates.
- How to ease the financial strain at home The global credit crunch, tighter credit conditions, rising bills, and soaring living costs have all taken their toll on household finances, and many consumers have found that it has become increasingly difficult to cope with
- Debt management firms may be able to write off debt As most people are aware the level of personal debt amongst consumers in the UK is very high, and with borrowing costs rising, the cost of living on the up, and increases in a range
- Even wealthier borrowers are now struggling to repay their loans A recent report has claimed that suffering severe financial difficulty is no longer a problem that affects only low income consumers. The report shows that financial difficulties are now even hitting homeowners living in fairly
- Most repossessions involve sub-prime lenders A recent report has shown that the majority of repossession cases in the UK involve sub-prime lenders. The research was carried out by the BBC in the light of the rocketing level of repossessions taking
- More bad news for those with low deposits Over recent months an increasing number of lenders have been demanding larger deposits from borrowers looking for mortgages, and this has resulted in many first time buyers and low income buyers being squeezed out of
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