Fresh data has raised concerns that a sizeable number of Britons will be placed under considerable pressure if the Bank of England presses ahead with further increases to base interest rates.
Threadneedle Street has hinted that concerns about inflation might mean that the next rise comes as early as May, with suggestions that several others could follow before the end of the year.
There are fears, however, that any such change could affect those struggling to pay off a mortgage or grappling with a significant household debt.
A Freedom of Information (FoI) request has found that household debt servicing costs are to rise by almost a third between now and 2023. The projections for the next five years are likely to place many people in a difficult position.
Shadow Chancellor John McDonnell warned that working families could be hit with “eye-watering increases” at a time when incomes were being inexorably squeezed.
His comments follow claims late last year that unsecured borrowing had led to a “personal debt crisis” in Britain.
Andrew Hood, a research economist at the Institute for Fiscal Studies (IFS), suggested that it would in fact be better-off homeowners who bore the greatest burden.
“The vast majority of household debt is mortgages and interest rates are widely predicted to rise over the next five years, so we shouldn’t be too surprised to see the projected debt servicing costs rising,” he said.
“Much of the cost will be borne by richer homeowners who have large mortgages and the aggregate figures don’t tell us much about other kinds of household debts such as credit card debt or rent-to-own loans.”
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