On Tuesday the US Federal Reserve cut the base rate from 3% to 2.25% on the back of the mounting credit crisis and rising numbers of foreclosures (repossessions) in the US. With the problems in the sub-prime mortgage market spilling over into the mainstream credit markets and the recent enforced sale of Bear Sterns to JP Morgan, financial markets around the world have been alarmingly erratic over the last few days. In light of this and the wider economic circumstances, the Fed made the decision to cut interest rates dramatically to provide cheaper money to banks. With the high cost of borrowing between banks being the root cause of all the economic problems, this cut should go some way to helping pull the US economy of the hole it finds itself it.
In times like these it is essential to keep on top of your financial situation. Try the Moneybasics Budget Calculator to see what your financial situation is like.
Read on for a summary of the week’s top personal finance news stories...
Tuesday 18th March
Inflation rises to nine month high – The latest figures for inflation from the Office of National Statistics show that Consumer Price Inflation (CPI) – the Government’s target measure – rose from 2.2% in January to 2.5% in February.
The Retail Prices Index (RPI), another measure of inflation that includes housing costs and council tax, puts inflation at 4.1% – the same level as in January.
While part of the reason that CPI rose was due to a change in the way that energy prices are recorded, the rise was also driven by increases in gas and electricity costs. Since the start of 2008, on average, gas prices have increased by 15% and the cost of electricity by 12%.
Many seek debt advice – A recent survey by the Citizens Advice Bureau (CAB) showed that rising numbers are seeking debt advice. While this is undoubtedly a somewhat worrying statistic as it implies that more people are likely to be in financial trouble, it also shows that more people are taking positive remedial action to deal with their debt problems.
The survey showed that in the first two months of 2008 there was a 35% rise in the number of mortgage queries.
In the second half of 2008 there were 13,500 repossessions, according to the Council of Mortgage Lenders (CML). Many people wait far too long to get help with their debt situation. If the letters from lenders keep coming through the mail and you can’t face to open them, get help now. Many of us are left lying awake at night worrying about our debts. If this is you too, get in contact with a free, independent debt advice charity:
Consumer Credit Counselling Service (CCCS) – http://www.cccs.co.uk/
National Debtline – www.nationaldebtline.co.uk
Citizens Advice Bureau (CAB) – www.nacab.org.uk
Thursday 20th March
Rise in retail sales – Many continue to be increasingly negative about the economic prospects of the UK economy and, to some degree at least, rightly. However, retail sales were 5.5% greater in February 2008 than in the same month last year, according to the Office for National Statistics (ONS). This shows that consumer confidence, an important driver of long-term economic success, remains at a level where many are not overly worried about their finances.
Prepared for Moneybasics by Jason Taylor, Advocacy Officer (Credit Action).