The Bank of England has warned that the huge increase in personal borrowing could see interest rates rising.
The Bank has hinted that it would also like lending criteria be tightened to make it harder for those susceptible to financial difficulties to get credit. If such plans go ahead, this could lead to tougher credit scoring and stricter affordability rules. Although this may protect those at risk of defaulting on their loans, it could also prevent worthy borrowers from accessing the credit they need.
Lending criteria is already higher than ever before, with many people struggling to obtain home loans or even remortgage existing properties.
With rates currently at an all-time low, many economists are recommending that borrowers do all they can to cut costs before any changes are introduced.
Money Saving Expert’s Martin Lewis says: “The cheapest new mortgage deals are at near-historic lows, 2 year fixes at around 1%, 5 year at less than 2%. So I think it's worth anyone who's paying more checking if savings are possible by remortgaging (getting a new deal that pays off the old one). Even a one percentage point cut on a £100,000 mortgage saves around £80/mth.
“This is especially important if you are on your lender's standard variable rate (SVR) - the default rate you move to when your fix ends. Then savings can really be large.”
