Consumers Fearing Interest Rate Rises

Consumers in the UK are concerned about the possibility of future rises in the cost of borrowing, a new report claims.

The number of people in the UK expecting an interest rate rise within the next 12 months soared to its highest rate since April 2005.

The poll of 2,000 consumers by Lloyds TSB in May this year found that two thirds (66 per cent) are predicting an increase in the Bank of England base rate within the next year, up from 59 per cent in April 2006.

The balance figure (consumers forecasting a rise in interest rates minus those expecting a fall) was 59 per cent, with just seven per cent of consumers believing that the bank's Monetary Policy Committee (MPC) will reduce the cost of borrowing within the next year.

Trevor Williams, chief economist of Lloyds TSB Financial Markets, said: "This latest survey indicates that households across the UK are bracing themselves for the inevitability that the next rate move will be a rise."

The consumer barometer also suggests that consumers' confidence in the UK economy is sliding, with 25 per cent of those quizzed believing that their job was less safe than a year ago, compared with 25 per cent who thought it was more secure.

The Bank of England MPC voted earlier this month to maintain interest rates at 4.5 per cent for the tenth consecutive month, with experts predicting an increase at some point in 2006.