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Eight million Brits in serious debt as interest rates poised to 'rise twice more this year'
Last updated at 20:07pm on 01.08.07
Increased factory output could lead to rate rises - and misery for homeowners
More than eight million Britons are weighed down by serious unsecured debts, it is claimed, a number which could increase if interest rates rise yet again today.
The Bank's Monetary Policy Committee(MPC) will reveal at lunchtime whether it has decided to raise the base rate again from the current figure of 5.75per cent.
The majority of City analysts are expecting a rise in the near future, however it may well be put off to later in the year.
Any increase will be bad news for consumers, retailers and British industry, for it would take money out of people's pockets and so curb spending.
It will be a particular burden for those millions of Britons who are carrying big mortgages and other debt on credit cards, loans and overdrafts.
A survey by debt consultancy, Thomas Charles, suggests 18per cent of adults are weighed down by unsecured debt, such as on credit cards, store cards and loans, of more than £10,000.
The figure is up from 13per cent at this time last year and 14per cent in April.
The research found that 1per cent now owes between £10,000 and £20,000, a further 3per cent owe between £20,000 and £30,000, and 5per cent have amassed debts of more than £30,000.
One in four of this group admit that they frequently struggled to be able to meet their monthly repayments. The increase comes against a background of five quarter point rises in the Bank of England base rate in the past year, taking the figure to the highest level in six years.
The higher interest rates have added hundreds of pounds to monthly mortgage bills, while driving up other borrowing costs.
Research by the UK's biggest debt advice charity, the Consumer Credit Counselling Service, has found mounting debt pain among the middle-classes, who are carrying particularly large mortgages.
Thomas Charles director, James Falla, said: 'Over the past year, we have seen a sharp increase in the number of people who have taken on unsecured debt and are now struggling with repayments.
'The high pressure to maintain social and commercial status, particularly experienced by women, often goes hand in hand with high expenditure on the high street.'
He said there is worrying evidence that people are borrowing more in order to maintain their lifestyles and spending patterns, rather than trying to make economies. This threatens a personal debt crisis and bankruptcy. Retailers are worried that interest rises will reduce high street spending. The British Retail Consortium yesterday appealed to the Bank not to raise rates again.
Its director general, Kevin Hawkins, said: 'There is simply no case for another increase in interest rates this month. The effect of previous increases is already beginning to bite.
'Inflation is now falling. The full effect of those hikes is now working its way through the system and retailers need the Bank of England to pause for breath, not pile more pressure onto consumers.'
Company insolvency experts believe the interest rate squeeze will drive more small firms out of business in the second half of this year.
Reader views (7)
Here's a sample of the latest views published. You can click view all to read all views that readers have sent in.
Don't borrow loads of money to buy things you can't afford (or don't even need), and you won't get into debt.
- Daveb, London
So where does all this money go? I'm fortunate enough to have some savings, but I never see my interest rates going up. No wonder the greedy banks are making such obscene profits.
- Lezli, London/UK
This is stupid. I have little sympathy. If you can't afford it, don't buy it. Or if you want to take on the debt - you take on the risk. The government really needs to look at this with the banks and make it harder for people to borrow so much money. Otherwise, it's all going to unwind in a very nasty way.
- Sean, Central London
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