Borrowers prepare for more base rate rises

Posted: 09 Aug 2007 12:03:09 GMT

It looks as though the Bank of England is going to raise the base rate again before the year is out.

It looks as though the Bank of England is going to raise the base rate again before the year is out.

In fact, the Bank's Monetary Policy Committee may even decide to increase the rate twice in order to bring inflation under control.

The Bank's Quarterly Inflation Report hinted that if interest rates remain at their current level, inflation will not fall to the desired two per cent target within the next two years.

It also pointed out that even if the base rate was six per cent, inflation would not be brought down enough.

Mortgage holders will be bracing themselves for a rise to 6.25 per cent, the highest level seen since December 1998 but Vince Cable of the Liberal Democrats said many will be unable to cope.

"It seems that the Bank of England will have no choice but to raise interest rates," said the shadow chancellor.

"The position of heavily borrowed families with large mortgage obligations is becoming seriously grim.

"It is difficult to foresee anything other than a continuing rise in the number of people facing repossession and personal bankruptcy," he added.

The Council of Mortgage Lenders recently reported a year-on-year repossessions increase of 30 per cent.

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