Trevor Williams, UK chief economist at Lloyds TSB, said that while the MPC believed a rise in the rate and thus an increase in the amount of repayments on loans and mortgages linked to it would improve debt management, this was not the case.
“Borrowing is increasing and debt is increasing because rates have gone up. You would have thought that with higher rates people would be borrowing less, but they are still borrowing,” he said.
“The effect of last month’s rise has been very minimal in anything we can observe. It is too soon for that rate change to have had an impact on any of the economic variables that are released monthly.”
Britain has witnessed two rises in the interest rates since August as the MPC hopes to spur on better debt management amidst fears of an impending debt meltdown.
Mervyn King, governor of the Bank of England, recently warned of the dangers of growing debt levels, but it appears that Mr Williams believes that it may be some time before his warning is heeded.