Moneyfacts has said that a rise in the official cost of borrowing, which will be echoed in mortgage and personal credit rates across the UK, could be “the tipping point” for many people.
In fact, the website said it is very likely that the base rate will go up by a quarter of a per cent to 5.25 per cent, probably in the first three months of the year.
“With incomes already stretched and rising debt burdens exacerbated by increased utility costs and the delayed impact of Christmas spending on credit cards, a rate rise early in the new year could be the tipping point for many,” the website stated.
Although 60 per cent of the Moneyfacts panel believe that the year will end with the base rate at 5.25 per cent, 20 per cent expect it to have dropped back to five per cent.
Many experts are already predicting that excessive spending at Christmas will push people further into serious debt in 2007, which means that bankruptcies and Individual Voluntary Arrangements are likely to increase as the year progresses.