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BlogInterest Rates and Personal Finances – Economic Impacts on Manchester Communities

Interest Rates and Personal Finances – Economic Impacts on Manchester Communities

Manchester is effectively the Northern capital of England, being a seat of industry and a fast-growing urban centre with international appeal. But for those that live here, life is getting harder. Manchester’s swift growth has seen its local economy grow, with prices inflating accordingly – but recent economic events continue to threaten residents of Manchester’s smaller communities, and the fabric of those communities altogether.

Rising Rates of Interest

Rising rates of interest are a direct response to rising inflation. The Consumer Price Index (CPI) tracks the rise in costs of goods and services across the UK, producing a percentage that essentially tracks the severity of the cost-of-living crisis. With inflation still high after over a year, the Bank of England’s attempts to curb inflation involve the hiking of interest rates.

The BoE hopes to reduce economic activity by making it more expensive to borrow money; interest rates apply not just to savings accounts, but also to loans, credit and – crucially – mortgages. As such, borrowing is reducing, but households are impacted.

Direct Community Impacts

It is in this way that Manchester communities are expected to endure increased hardships in the coming months. Rises in interest rates have direct and immediate impacts on mortgage repayments, as those on tracker mortgages see their repayments leap up to meet new rates. Those on fixed rates are briefly saved from the cost, but will have a much steeper rise when that rate eventually ends.

Re-mortgaging has always been a useful way to re-access equity in a property, but with property values set to fall significantly, this could result in even more dire economic consequences for local communities. An alternative, and one which could enable continued mortgage payments and property ownership, comes in the form of equity release – wherein part of a home’s equity is released in advance, and repaid from the estate.

Indirect Impacts

But communities are not just set to be hit by falling property values and high mortgage rates. These same interest rate rises will heavily impact businesses, big and small, in the same communities. Businesses with long-term loans might see their terms change, while newer businesses might struggle to secure affordable funding for new enterprises or growth.

As such, local economies risk being stymied by lower economic activity, negatively impacting neighbourhoods. Small business owners could have to shutter their doors, while customers spend more money seeking the same goods and services elsewhere. In this way, smaller deprived areas like Sale Moor and Blackley risk further deterioration, and the loss of vital economic circulation.

But what is the solution? England’s regions are currently at the mercy of government and Bank of England policy, and the consequences of mistakes made along the way. Continued devolution of powers to regions, as has been happening with Manchester and West Yorkshire, are important first steps in ensuring each region’s best interests are met.

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