- 26
- Apr
Thousands of consumers could develop debt management difficulties if interest rates rise next month, a new report claims.
According to a study by Business Strategies, a rise to the base rate in May could cause the proportion of home repossessions to rise from last year’s figure of 17,000 to 43,000 by 2009 as consumers struggle to make loan repayments.
The report’s author, Dr Neil Blake, said: "Even if rates go up only by a quarter point in May, we expect severe increases in financial stress."
More than 115 families could lose their homes everyday as they cannot afford increasing mortgage costs.
However, if interest rates increase to 6.25 per cent could further exacerbate borrowers’ debt management problems, with Business Strategies claiming it may result in 55,100 homes being taken back by lenders within the next two years.
Dr Blake added that with as base rate rises can have a "knock-on effect on bad debt", he recommended that borrowers should "consider carefully their future circumstances when assessing their financial position".
Earlier this week, Peter Spencer, chief economic advisor for the Ernst & Young ITEM Club, told BBC Radio Five Live’s Wake Up To Money programme that interest rates will continue to rise unless Britons curb personal loan borrowing.
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