Household finances going backwards

Unemployment has fallen to 7.1%, the Office for National Statistics has revealed today.

The unemployment rate for September to November 2013 has fallen by 0.5% from June to August 2013, with 2.32 million people unemployed.

The Bank of England’s previous forward guidance said that a base rate increase would not be considered until the unemployment rate fell to 7%, although this guidance came with caveats.

Damian Riley, director of business intelligence at HML, said: “It has certainly been a shock to see the unemployment rate fall to 7.1% so early in the year. HML’s recent research forecast that the unemployment rate would not fall to the 7% threshold until the beginning of 2015.

“With such a rapid decline, the market anticipates that governor Mark Carney will publically announce a lower unemployment rate trigger. When the time comes for the base rate to rise, this will be controlled and in small increments. However, our research shows that a 1.25% increase over a year could push 30,000 extra mortgage accounts into arrears.

“Inflation may have fallen to the Bank’s 2% target, but wage growth still stands at less than 1%. Household finances are still going backwards, albeit at a slower pace. It is still imperative that mortgage customers who are concerned about repayment affordability should engage with their lender at the first opportunity.”