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The trickle effect has finally hit the UK economy as consumers tighten their belts after four, almost successive, interest rate hikes. However, analysts are still reminding consumers that the interest rate has not hit the ‘breaking’ point of 6 per cent, nor has it hit the levels it did a decade ago.

Despite high spending in the retail sector last January, there are now reports which indicate that consumers are not spending as heavily as they once did.

Nationwide’s Consumer Confidence index is slightly higher than last month, as reported in Reuters.

“The index seems to be showing that consumers are responding to the three increases in interest rates. All of the indices are well below the levels recorded before the first rise in rates,” said Nationwide chief economist Fionnuala Earley, reports Reuters.

“Consumer sentiment remains fairly downbeat, but underlying feelings about jobs and income have not collapsed which suggest a fairly stable economic background,” she added.

However, there is good news for consumers who are trying to reduce their debt.  The Bank of England increased the interest rate in an attempt to lower the inflation rate.  While the interest rate impacts the economy, short term, a high inflation rate would create problems for years to come.

This leaves consumers who are trying to build wealth a window of opportunity to take advantage of the buy-to-let or residential housing market.

This is a good time to start a new business in many sectors except retail.  It is still relatively easy to apply for a secured loan that can be used to set up a business.

Today there are many savings accounts that are available online.  Internet savings accounts allow you to access your account conveniently and securely, allowing you to view your account and make changes at any time, whether it is early in the morning or late at night.

When you open an Internet savings account you will be able to view the statement on your account whenever you choose.  You can also transfer money from one account into another with a simple click of a button.  There is a range of Internet savings accounts available online, and are similar offers from those that are found in a high street branch.  In fact an Internet savings account can offer you a higher rate of interest on your savings account than a high street bank.  Because there are less administration costs involved with an Internet savings account, you benefit with a higher rate of interest.

If you are concerned about security over the Internet, you can rest assured that all Internet based savings accounts use the latest technology to ensure that your details are kept safe.  As you are searching for an account online you will want to read over the terms and conditions on the account that the provider is offering.  You will want to check the rate on the account to check if the high rate of interest is an introductory offer or if it is for the life of the account.  You will also want to view the different types of savings accounts that are available to choose on that is ideal for you.

The number of homeowner loans, mortgages, that were approved in December 2006, was down to 113,000 approvals from 129,000 in November.

Alone, these figures may be interpreted as evidence that the property market is about to slow, except for the fact that demand still outstrips supply, especially in the area of buy-to-let, and eco-friendly homes.

The Nationwide building society said that house price growth slowed in January, following recent interest rate rises. However, it still grew 1.8 per cent, maintaining an annual 10 per cent increase.

However, people who are anticipating putting their home on the market are still enjoying a ‘seller’s market.’  December is traditionally a quiet month for house buying..

However, approvals are regarded as an important indicator of short-term trends in the housing market. The market expected a short term drop after the Bank of England increased interest rates four times in approximately six months.

Investors are not worried. They still point to the fact that interest rates are still far below historical numbers, and that they are still below the ‘wealth building’ break-off point of six percent.

At £10.6bn the money lent in the form of homeowner loans during December was another record, even though the banks approved less loans, reflecting the strong rise in house prices in the past few months.

The investors are not worried. There is still plenty of room to take out a secured loan to improve a home, or prepare it for the buy-to-let market, and make a substantial profit, especially in the London areas.

Millions of Brits are now deep in debt and not ashamed of owing money. In fact, it is more of a stigma to rent and remain out of debt, or even build wealth, than it is to be hopelessly in debt and forced into bankruptcy.

Debt is now the norm in the UK. Teenagers start to build debt while still at school, and not on student loans, but on clothing and luxury items.

College students owe an average of £28,000.

Married couples owe their combined wages for four to five years to come. In many households, this debt excludes the mortgage.

The current figures claim that the UK personal debt levels increases £1,950,000 every 3.85 minutes according to Credit Action, a national money education charity.

“Our passion is to help people stay in control, rather than let money control them and disrupt their lives through over indebtedness,” says a spokesperson.

A Conservative Party poll suggested that as many as 9 million people are struggling to cope with serious debt problems. However, the Bank of England counters by claiming that 53 per cent of the people they polled expect to clear their debts by the end of 2007, excluding their mortgages.

This is hard for some watchdog groups to believe.  Currently, there are more credit cards than people.  APACS states that, in 2005, there were 74.6 million credit and charge cards compared with 60 million people.

The Financial Services Authority said that almost a third of all teens and young adults between 16-24 years old cannot manage a weekly budget.

The Authority, a statutory body set up under the Financial Services and Markets Act, said that 94 percent of all 16-year-olds believe it is important to know how to manage money, but only 53 percent are taught how to do so.

If you are looking into borrowing money that is less than £5,000, there are cost effective ways of borrowing money other than a personal loan.  Depending on your circumstances and requirements, you will want to consider just how much you really need to borrow and how long of a period you wish to pay it off.  If you search and compare the alternatives to a personal loan, you will benefit greatly.

One such alternative to a personal loan is a credit card.  If you plan to borrow a few thousand pounds over a short-term, then a credit card may be a better choice for you.  By finding a card that offers 0% interest rate on purchases for six to twelve months you will benefit greatly from the card.  However, if it is cash that you wish to use then a credit card will not be a good option, as the interest rate on cash advances are extremely high putting you at risk of falling into debt.  When you use a credit card for a large purchase, you will want to ensure that you will be disciplined enough to make the monthly payments.  Also when you repay the debt on your credit card you want to make large payments to help reduce the debt, especially if the card is charging you an interest rate.

A bank overdraft is another alternative to a personal loan.  A bank overdraft is best used for short-term borrowing.  Banks and building societies tend to charge high interest rates on overdrafts, but if you plan to repay the amount borrowed within a short time then you can benefit from a bank overdraft.  When you are looking into a bank overdraft you will want to compare the interest rates that are charged by the banks.  You also want to ensure that there is no annual fee or monthly charges.

Instant payday loans are short-term loans that can be useful to those who need the money between pay cheques.  In order to acquire a payday loan you simply need an active bank account with a debit card and a regular income.  These are the only requirements needed to qualify for an instant payday loan.  Instant payday loans offer up to £1,000 depending on the individual’s monthly income.

There are some payday loan companies who use online transactions and approve online applications for loans.  With the online services, the payday loan will automatically be deposited into your checking account once your application is cleared.  A repayment plan is set up and is worked out when you apply for the loan.  Typically the loan is due the next payday, however the loan can be extended with additional fees.

Fees that are involved with a payday loan include transaction fees and interest.  Often the interest rates are higher for these loans as they require no background check and are easily available.  There are some companies, however, who charge a flat fee instead of an interest rate.  The typical cost of a loan of £100 is £15 to £20.

Payday loans are easier to obtain than personal loans, can if you need cash for an unexpected expense or bill it could be a quick fix to your problem.  However, payday loans are short-term and should not be used often.  Because of the high interest and the additional fees that are charged when the balance is extended beyond the due date, a payday loan can prove to cost you more than you intended it to.  If you are cautious and use a payday loan for the right reasons it can prove to be extremely useful.

Debt Free Direct chairman Mike Blackburn, former chief executive of the Halifax, blames the increase in personal insolvencies on the banks.

“We are where we are because of excessive and imprudent lending decisions made by creditors, who end up with debtors strung up with debt they would never be able to deal with,” he said. “Why have the banks been squealing of late over their provisioning? Debtors are having credit thrown at them.”

The total number of personal insolvencies jumped in 2006, at least 45% to 67,584 cases. Debt Free Direct (DFD) estimates that 1m to 2m people are irreversibly over-indebted and will never be able to repay the capital on their loans.

The banks made £37bn in profit in 2006.  The banks have been criticised by several debt management charities for their careless lending.  Banks are deflecting the blame on individual voluntary arrangement (IVA) firms.

The banks claim that debt-management firms are selling unnecessary IVAs to consumers who do not need their services. The number of IVAs taken out last year increased from about 20,000 to 45,000 and their value increased from 15% to 30%.

HSBC raised the issue after its six months bad debt provisions increased in 2006 from £265m to £361m.

Recent reports suggest that banks are acting irresponsibly by releasing figures which states that teens are in serious debt because credit card companies have been lending unsecured loans to high school students.

Other reports have brought to light the fact that banks are issuing loans without asking clients for proof of income or referencing their consumer credit information.

One topic that has taken the forefront of all financial discussions are the interest rates and whether an impending housing market crash is in the immediate future.

The predictions vary depending on whether you ask an IVA firm, a realtor, an economist, or an opinionated writer.  One of the fundamental truths about the financial market is that many factors are influenced by the population’s opinions.

A healthy economy can stall if consumers loose confidence in their economy and stop spending.  This creates a ripple effect that touches every sector of the economy from lenders offering first-time homeowners a homeowner loan, to corporation takeovers.

“Affordability” is the key measure of the sustainability in any market.  This truth is being broadcast as fact over the internet, causing many homeowners to back off on their plans to borrow a loan or improve their home.

The measure of affordability has been the ratio of house prices to average income. This ratio has ruled in the UK economy for decades. However, not the UK is following trends in other countries where people have learned to accept the fact that they will never own their home.

The house price analysis website houseprice.crash.com shows a time series analysis of this ratio. This report states that the correction in the housing market usually levels out about four times the homeowner’s income.

This may point to a problem in the market, when looking at the UK market, but the figures are less disturbing when taking a global look at the housing market.  There was a similar panic when the ration breached five times in 2002.  This did not cause a housing price crash.

There are many types of mortgages that are available on the market.  Some mortgages are risky, while others offer a bit more security.  A variable rate mortgage can be a risky form of a loan, however if you want to take advantage of the current low interest rates, these types of loans may be the best option especially if you think that the rate will not rise over the years.  One such variable rate mortgage that may prove to be less risky is a capped rate mortgage.

A capped rate mortgage is a variable rate mortgage that has a fixed upper rate limit, or cap.  When you have a capped rate mortgage you know in advance just what the highest monthly payment you may have to make.  For example, if the cap rate on your loan is 7%, the loan will be charged at the current variable rate as long as it is no more than the capped rate of 7%.  A capped rate mortgage is generally a comprise between a fixed rate mortgage and a variable rate mortgage.

There are advantages that a capped rate mortgage offers, such as a peach of mind.  If there is a sudden inflation, and the interest rates rise, a capped mortgage offers protection, ensuring your repayments don’t go over a certain level.  It will also assist you with your budgeting, as you will know what the highest amount your mortgage repayments can be.  You will also be able to benefit from low interest rates without much risk.  However, capped rate mortgages are generally more expensive than fixed mortgages or discounted rate products.  As with any mortgage, it is worth shopping around and comparing price quotes and interest rates.

Whilst debt can help consumers start their lives quicker, often helping people reach a comfortable lifestyle a decade earlier than normal, it is also a form of slavery where the consumer is forced to make banks and financial companies rich in exchange for that decade.

Many consumers who borrow a homeowner loan this year will find themselves indebted for 40 years, or more, for the privilege of owning a home, despite the fact that the banks are raking in billions in profits each year.

Britain’s personal debt increases by £1 million every 3.85 minutes.  This increase is reflected in the number of consumers seeking debt management assistance.

Consumer Credit Counselling Service (CCCS) said that the average debt of consumers who contact them rose to £31,000 in the third quarter of 2006.  This is an increase of £2,283 over the last quarter in 2005.

A Bank of England survey estimates that 6 million UK consumers are struggling with their financial burdens. A poll conducted by the Conservative “state of the nation report” suggests that the number of adults who struggle under serious debt problem is now as much as 9 million.

This is a 7.7 per cent increase in the number of households struggling to repay their mortgage, according to the Bank of England.  However, the Bank of England does continue to explain that this represents a very thin sliver of the UK economy.  The BoE believes that the average consumer is still financially healthy, building wealth, instead of struggling to keep out of insolvency.