Bank Of England ‘Wary’ Of Increasing Financial Pressures

Britons could be set to see pressure on their finances increasing over the coming months, according to one industry commentator.

Ted Scott, manager of UK Growth & Income Fund for F&C Investments, claimed that the Bank of England is unlikely to increase interest rates before the end of the year in an attempt to curb inflation. However, he still claimed that consumers may witness surging struggles in their ability to purchase everyday items and make repayments on forms of borrowing such as secured loans. Mr Scott’s comments come in spite of the Bank’s recent quarterly report which forecast that a 0.25 per cent rise would be necessary so as to help inflation fall to the financial institution’s two per cent target within the next two years. Yet it was suggested that such a rise may not take place in the short-term as the Bank is concerned about putting too much financial pressure on consumers.

“Inflation is something the Bank of England is very vigilant about but the most recent inflation data was actually much lower than expected. Although a further hike in interest rates is not out of the frame completely, the Bank is wary of putting more pressure on consumers,” Mr Scott said.

In addition, he claimed that the impact of the recent ‘credit crunch’ - which has caused loan lenders to carry out more checks into borrowing applicant’s financial histories and become less willing to issue loans - is set to take its “toll on the consumer pocket over the next couple of months”. He added that a number of homeowners are also to witness a rise in mortgage payments as contracts on many fixed-rate and discounted products are to come to an end. Consequently these factors, in turn, could lead to a rise in consumers’ monthly outgoings which may affect their ability to make payments on their loans and spend on day-to-day expenses such as clothes and food.

Mr Scott stated: “There are already signs that consumer expenditure is slowing on the high street with retailers such as French Connection, JJB Sports, Next and Homebase all reporting a tougher sales environment.” However, it was the recent surge in food prices that the F&C Investments spokesperson suggested could see the Bank of England increase the cost of borrowing. He commented: “Food price inflation has been climbing quite high recently following a bad harvest and competition from alternative energies such as ethanol, forcing up the cost of wheat and grain prices.”

Meanwhile, he stated that the discounting of food witnessed in August was due to a “supermarket price war which is likely to only give short-term respite”. He reported that if inflation continues to increase then the Bank may well think about hiking interest rates in coming months, despite a general feeling within the financial industry that rates have peaked.

As a result, those concerned about rising pressure on their finances may wish to take out a low-rate loan as a means of supplementing their spending and consolidating demands for payment owed to various creditors. Earlier this year, research by Lloyds TSB revealed that 36 per cent of adults see reorganising their finances as their main priority for over the autumn. However, 60 per cent of these people believe that they will be able to make their plans a reality.

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