Many people ignore news about the economy because they do not realise that it actually affects their own personal debt. It is easy to think that your own debt problems take prominence over the sovereign debt of the nation, but the two are actually more entwined then most people think.
For example, the European debt crisis has made the cost of interbank lending rise; which may seem to be unrelated to one’s own debt but can have a very negative effect. This is because, in order to cover the increased costs, banks are increasing their mortgage rates and their variable rates; which means that if you have a SVR or tracker mortgage your monthly loan payments will increase, in turn affecting your monthly payments and impacting on an already stretched budget.
At the same time, as the economy worsens the threat of more inflation looms over all of the UK, and the continual costs of inflation mean that the pound will be worth less. Therefore, if your salary does not increase to match inflation you will find that you have less money free after paying utilities, the mortgage, and any other necessary bills, to actually put towards your personal debt.
Therefore, you will find yourself less able to pay off your debt. Even worse, if you are unable to make a payment you will start to incur late fees, causing your debt to rise as a result.
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