Interest rate increases 'will cause more repossessions'
Published On 27 April 2007
The predicted increases in interest rates could have a significant impact on the number of people suffering repossessions and seeking IVAs, a new study warns.Analysis from Business Strategies, Experian's independent global economic consultancy, suggested that an increase in interest rates of just a quarter per cent in May would see 3,800 more repossession in 2010 than there would have been if interest rates remained at 5.25 per cent.
However, if rates were to be increased by half a point in May and again by 0.25 per cent in June, Business Strategies predicted that there could be 16,200 more repossessions than if no interest rate increases occur.
Similarly, the extrapolations see unsecured loans write-off rate rising from 4.1 per cent to five per cent if interest rate rose to six per cent by July.
"Not only will interest rate increases have a dampening impact on economic growth and inflation, but there will also be a likely knock-on impact on bad debt," explained Dr Neil Blake, managing director of global economic forecasting at Business Strategies.
"Many consumers will also need to consider carefully their future circumstances when assessing their financial position. Rising bills coupled with the existing and possible future interest rate rises should be taken into account by borrowers."
Recently a group of economists predicted that the Bank of England could have to increase interest rates to 7.5 per cent to try and curb inflation.
