Bank ups base rate to 5.75%

With millions of consumers already facing debt management problems, the increase is set to further heighten the pressure on household finances.

After the rate-setting monetary policy committee (MPC) voted five to four in favour of maintaining the base rate last month the latest hike was widely expected and is likely to force more British borrowers into the debt management mire.

“The minutes of the June MPC meeting indicated that for at least some of these five committee members, it was a question of when to raise interest rates again rather than if,” said Howard Archer, chief UK and European economist at Global Insight.

“Further out, there is clearly a very real risk that interest rates will reach six per cent before the end of the year,” he added.

A base rate of 5.75 per cent represents a six-year high for the UK and the MPC has now opted to increase the cost of borrowing five times in the last 11 months.