With Bank Of England base rate now at 5.5% - and with forecasts predicting further interest rises - it's hard to believe that the rates were as low as 4.5% less than two years ago. While it may seem a small rise compared to the black days of the late 1980s, the financial climate is very different these days.



Personal debt including mortgages is higher than ever and the number of people finding it difficult to pay the bills each month is getting larger and larger. Statistics suggest that most people have a very fine financial balance with hundreds of thousands struggling to pay the bills each month.

This financial juggling act can be totally thrown by an increase in interest rates. Even a quarter percent can be enough to throw everything off balance.

When debt starts to become unmanageable it can be tempting to take an unofficial holiday from your mortgage – but just one missed payment on your mortgage can be even to start a downward spiral that can have drastic consequences for your financial future, your ability to get credit and even your health.

A missed mortgage payment means you are officially in mortgage arrears – unless you pay off your arrears immediately then you will be continue to be marked down as being in arrears even if you continue to make your payments as normal.

While your lender may be understanding, you have violated your credit agreement and they are within their rights to issue a demand for payment and then – if you are still unable to pay – a “Claim Form” which demands payment in 14 days or a written defence of your position.

If you ignore the claim form or the required court appearance then a CCJ will be issued that will stay on your credit record for six years unless paid within 28 days.

If you are still unable to pay then you face a possession order or even an eviction warrant – all because you chose to miss one payment.

The general advice here is that if things are getting out of control then you need to take action immediately – the smart way to do that is by taking action early as soon as an interest rate rise threatens your financial stability. Instead of missing a payment a call to a specialist remortgage company could allow you to arrange a new mortgage quickly and even leverage the value of your house to free up some extra cash.

The good news is that, while interest rates have been increasing, it doesn't appear to have taken its toll on house prices just yet with the average annual increase still at around 10%. That means that while you're struggling to pay the bills you may actually be sitting on money that could make your life much easier.