A doubling of interest rates in five years’ time will unleash a huge shock on consumers, according to BBC Business presenter and reporter Adam Shaw.
Opening the Travolution Summit with a session entitled ‘An economic overview and the travel industry’, Shaw told delegates: “We’re living in historic times but there is an even bigger shock in store. It’s not something to worry about over the next year or so, but keep your eyes open for it in five to 10 years’ time.
“Interest rates which are currently at 0.5% will rise a percent or maybe 2%. That’s a doubling of your interest rate, so if you can just about afford your mortgage now and you have got used to living when interest rates are this low, then you’re in for a shock when they rise. People won’t be able to pay their mortgages, credit card bills, for holidays – it will be a real problem. This is a massive change coming to make sure you are ready for it.”
In a slightly tongue-in-cheek reference to Donald Rumsfeld, Shaw also said that the number of unknown unknowns was growing.
“In other words, there are more things out there that could bite us on the bum than there ever has been for some time.”
He said risks were numerous, with many people currently concerned more than previously about specific countries and what’s going to happen to them.
Shaw told a story about someone he knew arriving at a meeting from Europe carrying a case of cash because he was convinced ATMs might genuinely not be able to dispense money by the time he got back.
“This really happened. This is a real concern.”
He added that extra uncertainty was created by “not knowing whose hand is in whose pocket” in Europe.
“We don’t know how exposed we are. If one bank goes, we have no idea who it’s going to take with it and this is another real danger.”
But Shaw said it wasn’t all bad news. He said: “There is growth around. Everyone keeps referring to the global economic recession but there is no such thing. There is massive growth around, even in 2012 – not in the last quarter but across the year. The perception is that everyone is in trouble but if you take that to heart you’re missing an opportunity. We work in a global environment and there are opportunities globally. Not everyone is in trouble.”