Base rate ‘set to increase’

The Bank of England is set to hike interest rates again soon, according to many respondents to a new poll.

A Lloyds TSB survey found 32 per cent of people expect this summer to see the long-awaited change from the 0.5 per cent base rate that has been in place since March 2009.

Of these, 18 per cent pinpointed July as the most likely month.

The study also found 44 per cent expect the rate to rise by 0.25 per cent by then end of this year, with 26 per cent anticipating an increase of 0.5 per cent.

Any increase, whenever it comes, could have major repercussions for some, not least those struggling to avoid repossession, for whom the record low rate of the last couple of years has been a lifeline.

The poll showed that 11 per cent of householders believe a base rate rise will have a significant effect on their household finances and this group may include many who are struggling with their mortgage repayments.

One way for those deep in debt to avoid repossession is through an individual voluntary arrangement, as this can save a home from being lost, unlike bankruptcy.

When, how often and by how much the base rate will increase has been a matter of much debate, not least among the Bank of England’s Monetary Policy Committee members, who are split on the issue.

Last week, editor of InvestmentandBusinessNews.co.uk, Michael Baxter ruled out a rate rise in May due to the level of economic growth in the first quarter failing to do more than cancel out the shrinkage in the last three months of 2011.

However, he said, there is a “consensus” among experts that there will be two increases this year.

Posted by Paul Thacker