Personal loan customers told inflation hits low incomes harder

Wed, 28 Mar 2007

Low-income families are being disproportionately affected by inflationary pressures, prospective personal loan customers may be interested to know.

According to data from the Alliance Trust Research Centre, the average household with less than £7,000 income per year has effectively seen inflation rise at 34 per cent faster than the headline rate.

Explaining the figure, the financial services provider's research division explains that low-income families tend to spend 41 per cent of their money on necessities such as food, housing and heating, whereas this drops to 17 per cent among particularly high-income households.

Shona Dobie, head of the Alliance Trust Research Centre, reiterated the findings of the report.

"Our two-year study has shown consistently that the UK's lowest income groups are facing an inflation rate which is substantially higher than the average headline rate," she said.

Another pressure on the budgets of families with little disposable income may be rising interest rates.

Since August 2006, the Bank of England has opted to raise the base rate on three separate occasions, meaning that variable-rate personal loan customers have typically seen their monthly repayments rise markedly.

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