Another increase in the Bank Base Rate in May 2007

The MPC of the Bank of England last week raised the bank base rate by a quarter of a percentage to 5.5%. The increase means that we currently have the highest interest rates since 2001. The high cost of borrowing adds to speculation that there may well be further rises in interest rates to try to stem the increases in inflation.

Consumer borrowing appears to be getting out of control, with spending increasing at a faster rate than income levels. The increase in spending has caused inflation to increase and has caused the retail price index to reach its highest level for 18 years. The bank of England’s Monetary Policy Committee, which sets the Bank of England interest rates, has tried to stem this increase in inflation by increasing the interest rates by 20% in the last year.

Economists believe that the current increases will put pressure on people already struggling with debt and the debt advice helpline at Moneymatchmaker.com is poised for an increase in enquiries from people already under pressure with debt. The prediction is that another quarter percent rise will result in sharp rise in the number of people balanced on the edge of insolvency.

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