FCA Says British Debtors Will Face Hard Times

Britons who are in debut and used to the low-interest rates of the previous era will be facing a number of issues in the coming months according to the Financial Conduct Authority (FCA).

This is mainly because interest rates are starting to go up and Britons will have to come up with new ways to pay their outstanding debts. Even if the interest rates are increased slowly, there will still be big problems for Britons who are in debt.

In a statement, the Financial Conduct Authority said

While interest rates are expected to remain low, a gradual increase in interest rates could have a detrimental impact on consumers who carry high levels of debt

The other problem most Britons who are in debt don't have a strong safety net because low-interest rates mean they have less saving. This is a big problem for families that are aging and have fewer resources to pay for their retirement.

The use of credit has grown considerably in recent years. A good example of this is in the mortgage market. A lot of first-time home buyers have been taking out large loans that have been affordable so far because of low-interest rates. Higher interest rates would hit these borrowers hard.

The FCA is planning to take action already, targeting high-cost credit. This is the loan that many low-income borrowers are offered, mainly because of their high-risk factor. The FCA will also review the total cost of rent-to- buy schemes, along with insurance and warranty offerings that often add greatly to the cost of purchase. Finally, they will examine the practice of combining home-collected loans together – which can also raise borrower's costs. Overdrafts are also scheduled for an examination.

FCA Concentrating On Brexit Consequences

The financial watchdog already has a full plate considering it is spending around £30 million to help the UK navigate the financial perils of Brexit. The FCA has been giving advice to the government to help ensure that the financial health of Britain stays on an even keel.

Right now, the FCA's Business Plan which guides the UK regulator's activities is focused on the EU withdrawal. This is important since it will impact quite a few financial regulations and the firms that they oversee. The watchdog is swamped with work which includes a review of their Handbook, which is the regulator’s resource for financial firms. The Handbook will be delayed until 2019 which is when Brexit is expected to be completed.

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