Interest rates up to 5.5%

The quarter point increase, which is the second such hike of 2007, will stretch the finances of borrowers across the country and make it more difficult for many to avoid bankruptcy.

Financial pressures are likely to increase particularly on home owners, whose mortgage repayments will rise in accordance with the bank’s decision to increase the cost of borrowing in an effort to control inflation.

The latest increase in the base of rate of interest is the fourth since August of last year and was widely expected following the release of the most recent consumer price index inflation figures, which for the first time in a decade topped three per cent.

Howard Archer, chief UK and European economist at Global Insight commented: “We would not rule out another 25 basis point hike as soon as June, particularly if consumer price inflation comes in at three per cent or above in April.”

Earlier this month, the Insolvency Service revealed that the number of individual insolvencies during the first quarter of this year was up 23.9 per cent the same period of 2006.