The new year has brought with it new bank rate increase which is positive or bad news depending on your financial standing. As the rate of inflation rises, the Bank of England has been compelled to raise the base rate by a quarter of a percentage. This was unexpected, as rates were raised at least once towards the end of last year. It seems that made no impact on borrowing - especially home loan lenders - and spending and therefore inflation thus the need for a another rate increase in such a short while.

Savers generally will benefit hugely from this increase but more so those with index-linked accounts. Overall, savings rates have risen by a 1/4% to 3/4% across board. For investors whose money in the bank is in tax-free accounts such as TESSA's or ISAs, the rates are even more attractive: some products on offer are currently offering as much as 9.75% on all accounts. In times like this, on can say that, an index-linked account is a good choice for savvy investors, neverthesless, a downward spiral of base rate mean the rates plunge too. Home loan holders who do not have fixed rates are probably the hardest hit by this rate increase. An average 100,000 mortgage will attract an extra 68.00 This is quite hefty considering the current energy bill increases particularly in the natural gas and electricity sector.

Whether we like it or not, rate hikes has an effect on us all directly or indirectly. Increase business expenses are directly passed onto the consumer in retail prices. The domino effect happens as there is the sense of everything being expensive, thus consumers are reticent to spend fearing future implications. This in turn affects retail profits and the cycle continues. For the unlucky few, bankruptcy moves from being a possibility to a reality. Should this happen, the results can echo for a long time to come. Bankruptcies can be reported for a minimum of 7 years and sometimes even up to 10 years. During this difficult time, getting credit can be a nightmare and if obtained it is usually expensive. Low interest credit cards will become a thing of the past. To compound this, some energy companies will install pre-paid meters once they familiarize themselves with your credit history. Pre-paying for energy whether gas or electricity is generally dearer.

For those who find themselves in a bad shape after a rate increase, a good "do it yourself credit fix" plan can make all the difference in easing the situation as time goes on. Salvaging your credit, when rightly done, is not instant action, but rather a painstaking process. You could use legal services to do this on your behalf, however, it comes at a price and unless there are inaccuracies on your free credit report, it is debatable whether they can make a real difference. Credit history can be rebuilt slowly by doing small but meaningful things like paying your energy bills on time, honoring your credit card payments as soon as bill is received, making credit agencies to report positive items on your credit report if some of your creditors do not report to them. Beware, this may come at a cost, but it may be well worth it.

To end this, a increase in borrowing rates will always have an adverse effect if you have a loan or a mortgage which is not on fixed rate. Changing this coupled with prudent spending can turn things around positively.