Tuesday 15th May, 2007 

Banks last week raised the base rate by a quarter of a percentage to 5.5%. This is the highest the rates have been since 2001. The high cost of borrowing fuels speculation that there will be another rise in interest rates to try and cut inflation.

Consumer borrowing appears to have spiralled out of control with the rate of spending increasing at a faster rate than income levels. This increase in spending has caused inflation to increase and cause the retail price index to reach its highest level in 18 years. The MPC (Monetary Policy Committee), which sets the Bank of England interest rates, has tried to stem this increase in inflation by increasing the interest rates by 20% in the last year.

Many economists believe that the current increase in interest rates will put pressure on people already struggling with debt. Their prediction is that another quarter percent rise will result in sharp rise in the number of insolvencies both individual and business.