In a week where it was reported that many credit card lenders have been reducing their customers’ credit limits, it is important to remember that no matter what your limit is everyone should learn to live within their means.
Borrowing to pay off existing debts is one of the first signs that an individual has started heading into dangerous financial territory. If you can relate to being in this position and have had your credit limit cut too, the cut is probably going to do more good than harm. Anyone struggling with debts, as typified by someone borrowing to pay off existing debts, should seek independent, free and confidential debt advice help.
The financial week that was...
Wednesday 20th February
Bank voted 8-1 to cut interest rates to 5.25% - The minutes of the Monetary Policy Committee (MPC) meeting of the 6th and 7th February 2008 were released on Wednesday. They showed that all but one member of the MPC, who set interest rates in the UK, voted to cut interest rates by a quarter-point. David Blanchflower, a member who is often seen to be keen on low interest rates (sometimes referred to in economics jargon as a ‘dove’), voted to cut interest rates by a half-point.
The fall in interest rates should help to relieve on the burden that can be placed on mortgage owners by the five interest rate rises of 2006 and early 2007. However, it is vital to consider how much it is feasible for you to borrow on a mortgage. Have look at the Mortgage on Moneybasics and why not try out the Mortgage Calculator to see how much you are able to borrow and still live within your means?
Friday 22nd February
The end for 125% mortgages – On Friday the last 125% mortgage (for example, borrowing £250,000 on a property valued at £200,000) was taken off the market. Lenders considered these mortgages to be too high risk considering the current economic climate.
While a mortgage that allows you to borrow a lot of money can sound like a great idea, it’s important to seriously consider whether you are going to be able to meet the demands it places on you. Always have three to six months of savings stored up in case there is a change in circumstances or unexpected cost such as a job loss or a car that needs to be fixed.
Technology to help young people manage money – Citizens Advice Bureau (CAB) and YouthNet have teamed up in a £300,000 project to help young people with their money. The project will provide advice for 16 to 25-year-olds through the use of podcasts, mobile phone factsheets and other online content. This is an innovative way of delivering advice about money and hopefully will help to fill some of the information vacuum that is prevalent across the UK about personal finance matters.
As a reader of Moneybasics, you are a role model for the rest of the population in how to take control of your financial future. By reading this site, you are increasing your financial literacy and in so doing you are making the decision to take control of your money, rather than letting your money take control of you. So congratulations and keep up the good work!
Prepared for Moneybasics by Jason Taylor, Advocacy Officer (Credit Action).