Rate rise will not address debt

The Bank of England's decision to raise interest rates will not be enough to stem spiralling consumer debt on its own, according to Citizens Advice.

15:44 06 May 2004

The Bank of England's decision to raise interest rates will not be enough to stem spiralling consumer debt on its own, according to Citizens Advice.

Responding to the announcement by the Bank of England of a quarter point increase in base rate, Citizens Advice said a raft of wider measures to promote sensible borrowing were needed to tackle the UK's escalating debt crisis.

Citizens Advice is the biggest provider of free and holistic debt advice in the UK. The organisation has seen a 44 per cent increase in new consumer debt enquiries in the last six years with bureaux now dealing with over one million new debt enquiries annually.

Research by the organisation shows that on average Citizens Advice Bureaux clients up and down the country owe nearly 14 times their monthly income.

Citizens Advice Director of Policy Teresa Perchard said: "Today's interest rate rise has undoubtedly been made to cool rising consumer debt, a goal with which we wholeheartedly agree. But this alone isn't going to tackle the growing problem of over-indebtedness.

"The immediate short-term impact is likely to be added expense for individuals with mortgages to service, and we would expect to see an increase in debt inquiries as a result of that.

"In the longer term, a wider range of initiatives is going to be needed to find a solution to the UK's debt problem."