Pity the brave souls of Hull. After high water levels brought devastation to large parts of the city, high interest rates are set to inundate households’ finances.
A report published on July 13 by Experian, the business services group, says the east Yorkshire port will be one of the places most at risk from the Bank of England’s monetary tightening.
“There are winners and losers when interest rates change,” said Neil Blake, chief economist at Experian Business Strategies.
“People with savings will gain and those with mortgages or large amounts of unsecured debt will lose out. However, our research shows that the winners and losers are heavily concentrated in some locations and in certain socioeconomic groups.”
Experian assessed various factors that determine an individual’s wealth, including levels of indebtedness, income, taxation and spending. It found the city of Kingston-upon-Hull was the eighth most vulnerable place to higher interest rates; Slough was most in peril, followed by Newham and Harlow.
Mr Blake explained that quite prosperous towns such as Slough were vulnerable because their growing economies had attracted an influx of workers, who then had to buy expensive houses.
This meant a large proportion of people in these areas had high mortgages relative to earnings, making them particularly sensitive to climbing interest rates.
“Hull is joined by a number of areas of the UK that contain higher proportions of people with large mortgages, lower gross incomes, significant levels of unsecured borrowing and fewer savings,” said Mr Blake.
A socio-economic sub-sector prevalent in such communities has been dubbed “just moving in” by Experian. These are young families on new housing estates who are “highly materialistic, with a heavy dependency on credit to fund their consumer lifestyle”, it says.
Also vulnerable are “burdened optimists” – thrusting young unskilled and semi-skilled workers using credit to obtain a standard of living beyond their means. “Typically, money troubles contribute to high levels of separation and single parenthood in these neighbourhoods.”
Those towns best able to manage higher borrowing costs have a preponderance of groups such as “bungalow retirement” and “high spending elders”. These are older households for whom credit is a dirty word and who have high levels of savings. The least vulnerable areas include rural retirement retreats such as east Dorset, north Norfolk, the Chilterns and the Cotswolds.
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