Repossession and debt to be caused by inflation surge?

The rate of inflation in the UK is going to go on rising, it has been predicted.

Following news yesterday (January 18th) that the consumer prices index (CPI) figure was 3.7 per cent last month – up 0.4 per cent on November – Moneysupermarket.com predicted the trend will continue to be an upward one in the months ahead, something that could push the Bank of England’s Monetary Policy Committee (MPC) into raising the base rate.

Noting the CPI rate has been substantially above target for over a year, head of banking at the site Kevin Mountford said: “With increases in VAT and soaring petrol and commodity prices throughout the world, it is likely that inflation will increase further before it falls.”

He added: “And this can only lead to pressure on the MPC to increase the Base Rate in order to tackle the problem.”

While rising prices may themselves make it harder for those in debt to pay off what they owe while dealing with rising bills, a base rate hike could add more trouble for people with mortgages as well.

It could mean some who have managed to get by and stay in their homes in the recent past may face the prospect of repossession as their home loan repayments climb.

VAT is one factor the MPC may take into account when it considers its policy, as this is a one-off addition that will drop out of the reckoning a year from now.

However, the Trades Union Congress has argued the rise in living costs faced by many people means this would be a good time for chancellor George Osborne to reconsider the VAT rise.

By Amy White