Fasten your seatbelts

The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.

January is almost over and the long period between the December and January pay cheques has passed.

However, don’t pop the champagne cork just yet for this replenishment of our current accounts doesn’t mean we’re all solvent once again – far from it.

The Daily Mirror’s Tricia Phillips highlights the level of personal debt in the UK is a staggering £1.5 trillion.  And the BBC’s Kevin Peachey reports the number of people declared insolvent in England and Wales owing to unmanageable debts was 13% higher in 2016 compared with the previous year.  In Scotland, the number rose 7.9% over the last quarter to 2,616.

Eye-watering as these figures are, the conditions surrounding them have been relatively benign for consumers. Interest rates are at an all-time low, encouraging people to buy goods and services on credit.  The same low interest rates also make saving in cash accounts less appealing.

A combination of burgeoning levels of debt and lower levels of saving is a recipe for trouble ahead.

That’s because interest rates could be set to rise to combat increasing inflation rates and an increasing cost of credit – whether it be loans or mortgages – could cause real hardship for many if they’ve not accounted for this.

Taking action to reduce your level of debt will help your family finances. A good starting point here is the Mirror’s Tricia Phillips again offering some tips on steps you can take.

It is difficult to say when interest rates will go up because the UK economy, much to most commentators’ surprise – has remained remarkably resilient in the months post-Brexit.

We may get an indication of the latest Bank of England thinking when its monetary policy committee announces its decision on interest rates on Thursday 2nd February. The prospect of sustained above-target inflation will eventually lead to an increase in interest rates, but perhaps not at this stage as this could be too much of an admission that the Bank’s post-referendum cut in Bank rate to 0.25% in August was an overreaction.

One thing’s for sure – 2017 is going to be a bumpy ride with all the current global political uncertainty. Even if the bank rate does not rise soon, being prepared for it by reducing debt and building up savings could be the comfort blanket your family finances need.








No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.