Highest interest rate hike in decades but ‘people simply can’t make ends meet’

Householders and small business owners in Northern Ireland are bracing themselves for more financial hardship after the largest hike in interest rates since 1995.

By Mark Rainey
Thursday, 4th August 2022, 6:55 pm

People on low incomes, and already struggling to make ends meet, simply cannot cut back further on their spending, one debt advisor has warned.

Following Thursday’s announcement by the Bank of England – that the base interest rate will rise from 1.25% to 1.75% – many people are fearful of how they will cope with an expected autumn rise in energy prices, Advice NI said.

“People are coming to the debt advice services because they simply can’t make ends meet. They don’t have any more savings, their disposable income in gone, they are using credit to pay for essentials,” according to Sinead Campbell of Advice NI.

Cost of living crisis

“How do you tell somebody who is already down to the bare minimum to budget?” she told BBC Evening Extra.

Mortgage advisor Mark Campbell has also warned that anyone coming to the end of a fixed-rate mortgage could be in for a nasty shock.

“What you will find is that if you are coming out of your fixed-rate deal, at an interest rate of maybe 1.5% or 2%, you will probably find that your interest could jump fairly significantly to maybe around 3.5%.”

He said that someone with a £175,000 mortgage could see their monthly payment increase by up to £200 per month.

Sinead Campbell of Advice NI

Neil Hutcheson of the Federation of Small Businesses NI (FSB NI) has appealed to politicians for help to enable its members to “ride out the storm of pressures” facing them.

He said both the UK Government and Stormont must act to relieve the pressure being put on small businesses

“Nine out of ten SMEs (small and medium enterprises) tell us that costs are now at a record high, driven primarily by ballooning prices on fuel, utilities, product inputs, labour shortages and tax increases,” Mr Hutcheson said.

“A combination of factors has led to current inflation levels, and so it will require a suite of interventions to help fix the issue.

“We know the task of tackling inflation is a difficult one, but a jump in interest rates will compound the pressure on small businesses, at least in the short term, as increased costs of finance for small businesses are met with a decrease in consumer spend.

“Whilst this is the stated intention of the Bank of England, it will take time for an isolated measure of this nature to take effect.

“Therefore, we need to see politicians at Stormont putting themselves in a position to make decisions on the areas for which they hold responsibility, such as energy costs and business rate reliefs.”

Mr Hutcheson added: “At the same time, the UK Government can assist by reversing the hike in National Insurance, cutting VAT and fuel duty. It is a combination of these fiscal measures that can help limit damage to small businesses. The cost-of-living crisis cannot be solved without solving the cost of doing business crisis – if we must bring down inflation, we must do so using the full range of interventions possible.”