Bank of England warns of impending interest rate increases

In recent days, the Bank of England (BoE) has warned that it intends to increase interest rates “sooner and faster” than previously expected over the coming months.

BoE Governor Mark Carney has said that rising wages and strong GDP growth indicate that the UK is currently well-positioned for higher borrowing costs.

The Bank’s Monetary Policy Committee (MPC) unanimously voted to leave its base rate at 0.5 per cent earlier this month. However, it has since indicated that an impending rise could be on the cards for as early as May.

Concerns have been raised that another increase in interest rates could prove problematic for hundreds of struggling households that are already finding it hard to get to grips with the pace of inflation.

However, prominent think tank the Resolution Foundation has published a new analysis which suggests that the UK is largely “well-placed” to cope with higher interest rates.

It states that Britain’s trend towards mass consumer borrowing has been driven largely by wealthier households, indicating that fears over “the imminent bursting of another credit bubble” were largely overblown.

Matt Whittaker, Chief Economist at Resolution, said that the majority of wealthy households were “better placed to service their debts,” but that any increase in the Bank’s base rate would still no doubt weigh heavily on the very poorest households.

“While the evidence shows that on the whole Britain is well prepared for future interest rate rises, policymakers must have regard for those low-income households who are already struggling to pay off their debts,” he said.

Elsewhere, other commentators have noted that interest rates have not risen above their current rate of 0.5 per cent since 2009.