Millions more families face ‘debt distress’ with interest rates set to rise
Millions more families will be plunged into “debt distress” as the Bank of England prepares to hike interest rates, a leading thinktank has warned.
According to the Resolution Foundation, low-income families have become dependent on cheap credit over the past decade, with half already struggling to cope with repayments.
But with Bank of England Governor Mark Carney indicating that interest rates are set to rise over the next two years, the organisation is warning that many more will be pushed into financial difficulties.
Matt Whittaker, the chief economist at the Resolution Foundation said: “It is very worrying that almost half of low-income families are already showing signs of debt distress…
“While rates have been at historic lows for a decade now, many families have experienced a tight income squeeze over this period and have not been able to get back on the front foot when it comes to servicing their debts.”
He urged the Government to consider how its economic policies will affect those dealing with spiralling debts.
“Policymakers must have regard for those low-income households who are already struggling to pay off their debts, and who could be really exposed if interest rates go up faster than currently expected,” he said.
Last year the Bank of England raised interest rates above 0.25% for the first time since 2007.
Mr Carney attributed the rise to inflationary pressures caused in part by the EU referendum result.