The bank of England has today increased interest rates by a further quarter percent to 5.25%. This is a total of 0.75% since August 2006. OK, on the face of it, the increase does not seem much. ie if your mortgage is £150,000 then this is going to push up your payments by about £30. However for many people who are already struggling with debt, this may be the straw that breaks the camel’s back.

Serious personal debt problems do not normally come about overnight. They are normally the product of spending beyond one’s means over 2-3 years. Initially overspending is hidden because of the buffers offered by overdraft limits and credit cards. However, continued use of these things to maintain payments (or robbing Peter to pay Paul) ever so gradually increases a person’s over all debt. If this happens over a prolonged period, the debt will eventually grow so large that repayments can not be made.

If someone finds themselves in this position, an extra £30 per month is certainly going to make a difference. January tends to be the most difficult time of year for people struggling with debt problems as the Christmas overspending hits home. As such, for these people, an interest rate rise now could not have come at a worse time.