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02/11/2017

R3's comments on the Bank of England’s interest rate decision

Commenting on the Bank of England's Monetary Policy Committee’s interest rate decision, Mark Sands, chair of insolvency trade body R3’s Personal Finance Committee, said:

"As widely predicted, the Bank of England's Monetary Policy Committee has today decided to raise the base rate to 0.5%.

"Even a small rise to the historically low level of interest rates could cause problems for many borrowers. Vulnerability to a financial shock like an interest rate rise is widespread; many people just don’t have much financial headroom left, following a long period of stagnating wages and growing levels of household debt. On the business side, our research has picked up thousands of businesses who would be unable to adjust to even a small interest rate rise.

"The latest statistics showed an increase in the number of people becoming insolvent in the third quarter of this year, continuing an overall upward trend since mid-2015. With interest rates having hovered near rock bottom for nearly a decade, many borrowers are deeply unprepared for any rise in the cost of personal credit – many will never even have experienced a rate rise. This is especially acute as use of credit can often be the only way people can afford to pay for a place to live, a car to get to work in, or even the basics, like food or energy bills.

"Our concern is that many people now take soft credit terms and low interest rates for granted, to an extent, whether or not they realise it, and should the current conditions change, they will find themselves exposed."

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.