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Interest rates `set to soar`

The interest rates charged on debts could be set to soar, as the Bank of England`s base rate is expected to start rising in the near future.

So says Andrew Sentance, one of the nine people who sit on the Bank`s Monetary Policy Committee, which actually makes the decisions about the base rate.

The base rate has stood at 0.5% ever since March 2009, but Mr Sentance says the "balance of opinion" on the Committee is now shifting towards an increase. Forecasts indicate that the rate could rise to around 2% within a year.

"If that happened," said a spokesperson at the IVA Advisory Centre, "it would mean the base rate has quadrupled - it doesn`t mean everyone`s mortgage rate would also quadruple.

"A tracker mortgage, for example, will `track` the base rate when it rises, so if the base rate doubled from 0.5% to 1%, that would mean a 2.49% rate on a tracker would rise to 2.99% - an increase of around 20%.

"Even so, any increase could have a real impact on a household`s finances. At a time like this, with so many people already struggling financially, that impact could be particularly difficult to cope with.

"We`d advise anyone who`s worried about the base rate to talk to an expert before the rate actually rises. Depending on their situation, they may be able to do a number of things to protect their finances in the face of increasing costs."