Debt consolidation: don't bet on credit getting cheaper

It was widely seen to be the first of several interest rate cuts that would ease the financial pain of millions of Brits – but December’s Bank of England interest rate cut no longer looks like it will herald a return to cheap credit.

The latest evidence suggests that credit might actually get more expensive in 2008 – although millions of households could still avoid a financial hangover by making debt consolidation their New Year’s resolution.

Problems forecast for debt consolidation customers
Articles in the Daily Mail and on money website thisismoney.com point to the cost of borrowing rising in coming months. The Mail forecasts problems for people with credit card debt in particular.

The newspaper quotes Martin Lewis of financial website moneysavingexpert.com, who said, "Will credit card rates rise next year? Yes. People who then try to switch to another card company to avoid the possibility of [paying] more face being turned down."

The Mail also says the situation “is likely to mean that many families looking to pay-off hefty debts will also be among the worst affected as they face being refused loans.” – meaning debt consolidation will become harder.

“A growing number of banks are turning down credit card applications to try and reduce their own debt burden,” the newspaper adds.

Unusual situation for debt consolidation
Usually, cuts in the Bank of England base rate would prompt lenders to cut the rates they charge customers. But because banks have severely reduced the amount they lend each other, they are lending less to their customers – which pushes up their rates.

Even if the amount of borrowing between banks increases, the likelihood of the Bank of England cutting rates again is receding.

The rising cost of fuel and food suggests inflation may become a bigger problem for Britain than the Bank had previously feared – and makes them less likely to cut their base rate.

Thisismoney.com reported, “Speculation mounted that this month's Bank of England rate reduction could be the last for months.”

People betting on getting cheaper credit in 2008 – and delaying their debt consolidation as a result – might find they are backing the wrong horse

Get debt consolidation help with Homebank
If you are thinking about debt consolidation, let the experts save you time and money by finding the right debt consolidation loan for you.

Homebank have qualified mortgage consultants ready to advise you with all your debt consolidation, mortgage and insurance needs. For informative, insightful advice on debt consolidation, call us to arrange a no-obligation appointment to suit you.

Homebank are the “people’s mortgage broker”, with thousands of products to choose from, including some that are not readily available on the High Street. Homebank’s experienced consultants could find the ideal debt consolidation product for you. Call Homebank free now on 0800 052 3604.