Interest rate prompts consumers to 'batten down the hatches'

Signs that the rises in the base rate are starting to trickle down to consumer activity are continuing to emerge, with the latest figures from leading price comparison sites suggesting a shift in attitudes.

The monetary policy committee (MPC) has adopted a hawkish stance to curb inflation and, with indicators suggesting the UK's economy is continuing to strengthen, three rate rises have already taken place this year.

Now, with the base rate sitting at 5.75 per cent, the signs are that a climate of increased prudence has emerged, says MoneyExpert.com.

In its switching index for the second quarter, it appears that there are 5.4 million fewer consumers seeking to switch services than previously, as the public prepare for a period of belt-tightening.

Sean Gardner, MoneyExpert.com chief executive, commented: "The financial squeeze caused by higher interest rates has meant consumers are more inclined to stick with what they know and in any case providers are getting tougher.

"The reality is that consumers are battening down the hatches in preparation for a rough ride as the mortgage becomes more expensive and disposable income reduces."

The news comes as the latest figures from analysts with Ernst & Young's Item Club suggest the tax burden is also on the rise, with further rate rises anticipated this year.

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