Low interest rates used to mean debt was kinda affordable. Now interest rates are going up.
What it means: It’s not necessarily a bad idea to borrow money. Governments do it all the time, and some people think if they did more of it we’d all be better off. Millions of Brits borrow money to go to university or buy houses, and any of us who own a credit card use debt to buy everything from holidays to frappuccinos to the latest economic bestseller (or is that last one just us?).
But debt is a problem if you can’t pay it back. Which is why it’s very much Not Good that for the first time in about 30 years, UK households are spending more than their earn. That’s according to the Office of National Statistic (ONS), who also says that people are borrowing so much because banks have set really low interest rates since the 2008 financial crash. The interest rate is the price you pay to borrow money, or the payment you receive when you stash your savings at the bank. When interest rates are low, people are encouraged to save less and borrow more.
But now the Bank of England has put interest rates up, from 0.5% to 0.75%. That means loads of people with debt (including some mortgages) are suddenly having to cough up more money.
