Interest Rate

Interest rate as you have learned is a certain amount of money charged to the capital or principal loan over a specific time frame. This interest is equivalent to a certain percent of the capital loan itself.

The history of charging interest can be traced back around 1500 BC, during the early civilizations of the Egyptians and Sumerians. The term was continuously used until the medieval period when it was used to refer to holy property. During that time, imposing an interest would mean putting the divine property into commercial purposes. Such practice was vehemently opposed by the church. But due to continuous patronage, interest rate has become a common practice from the era of industrial revolution until the present times.

Present Interest Rate in UK

The main concern of people when borrowing money is the interest rate. In fact, it is the perennial and main basis of loan shopping, research, and comparison. This is the reason why any rate fluctuation in the financial market promptly rouses the attention of both the lenders and the borrowers.

In the fast few months, it has been reported that there is an alarming increase of interest rate imposed on loan. This was after financial institutions in England have increased the rate four times since the third quarter of 2006 until the second quarter of this year. If summed up, the total increase would amount to 1%, a significant figure for an average earning borrower.

Effect of the Interest Rate Increase

This condition in the financial market has resulted to an increase in the number of UK debtors who are striving to pay their debt on time.

Due to the successive increase of interest, more than 7,500 debt payments were not met by borrowers in UK. It has been recorded that in just six months of this year, nearly 1.5 million debts were not repaid by borrowers on time. This has become the result whenever the rate of interest is increased more than once in a short span of time.

In comparison, the 2% missed repayment during the first half of 2006 has now soared to 3% in the initial half of 2007. With the speculation of another increase, many consumers are becoming more worried of their financial status.