2011 ‘to see increase in need for debt help’

More people will need debt help in 2011 because of changing economic circumstances, it has been suggested.

Editor of finance website CashQuestions.com Annie Shaw said a variety of factors could cause this situation, with one of them being employment as many struggle with losing jobs, or only working on part-time or reduced hours.

However, she noted one of the major impacts is likely to be a change in interest rates, with the period of nearly two years in which the base rate has been at a record low of 0.5 per cent likely to end soon.

Speaking about people who have been enjoying the benefits of low rates, Ms Shaw stated: “They could take a hit if they start [to] see an increase for their housing, because they are seeing things like the VAT go up, their fuel going up, their transport costs going up.”

Thus far such households and individuals have been “spared” the worst of the pain because monetary policy moves have reduced mortgage payments, but this will change as soon as the Bank of England decides it has to act against inflationary pressures.

The Bank of England’s Monetary Policy Committee (MPC) voted to hold the base rate yesterday (January 13th) and Royal London Asset Management said he expects when the minutes come out later this month to see nobody except Andrew Sentence voting for a rate rise.

He suggested the MPC will “tread carefully on their exit strategy” in the coming months, as it will not want to dent confidence by giving the impression that there is a prospect of a quick return to pre-recession base rates.

By James Francis