Growing personal debt is a ticking time bomb and trouble will come when rates and inflation start to creep up

 
Hannah Maundrell
Money, Money, Money
Make the most of it now, as interest rates and inflation will start to creep back in (Source: Getty)

It’s no surprise that we’re borrowing like there’s no tomorrow; prices are low, credit is cheap and coupled with wage growth you could say there’s a feeling of positivity in the air. Make the most of this sweet spot now; we’re watching a ticking time bomb and trouble is likely to be on the horizon.

The Bank of England keeps teasing us with hints of an impending base rate rise and even though it’s not expected imminently homeowners that aren’t on fixed rate mortgage need to take note.

If you couldn’t afford to pay any more than you do now see if you could save by switching to a long term fixed rate. With rock bottom interest rates on even 10 year deals, switching could save you a bundle and protect you against rate hikes for years to come.

Mortgage lenders seem comfortable with the new affordability rules but you still need to check your credit report and have at least 3 sensible months’ of spending before applying to maximise your chance of getting the deal you want.

There’s still stiff competition for anyone trying to buy and there’s no sign of a seasonal slowdown; even spiralling house prices don’t seem to be putting people off. The Government’s new schemes for first time buyers are set to fuel the market further and with no shortage of wannabe homeowners this rush to own won’t end anytime soon.

Renting is rightly still not seen as a long term alternative. The revamps to tax relief and new stamp duty levy are likely to mean landlords hike prices, and that’s not factoring in a crackdown on Buy to Let lending. This paints a worrying picture for renters and there’s no clear solution.

It’s not only property where we’re splashing the cash; the figures show we’re flexing our credit cards too and Black Friday sales had us spending like there’s no tomorrow.

Picking the right credit card can give you years of interest free repayments; switch regularly and decisions to link interest rates to the base rate will have no impact. The trouble is too many people are paying interest and still spending more than they can afford.

The reality is if we’re not careful we’ll see many households facing real difficulty as soon as rates and inflation start creeping back up.

A word of caution: borrow now by all means, but do it carefully.

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