Interest hike to hit travel

THE Bank of England’s 0.25% interest rate rise will deter consumers from “big ticket” purchases such as cars, electronic equipment and holidays, according to a leading economist.

Lloyds TSB financial markets chief economist Trevor Williams claimed the latest increase would unnerve consumers because it is the first successive monthly rate rise in four years.

“There are a certain number of purchases consumers will tend to put off if they don’t feel confident about the economy, and travel is top of that list.”

“People will be reluctant to make those impromptu purchases, such as last-minute breaks, because they may be uncertain about how much spare cash they have or whether their job is secure.”

Williams said rates should remain steady until August, but warned they could rise to around 5.5% as the Bank attempts to slow down the economy.

Geddes Travel owner David Geddes agreed holidays could suffer.

“It’s just another dent in people’s pockets. With increasing fuel prices, any rise in interest rates is going to eat into people’s spare cash, so it may put them off those larger purchases.

He added: “The market is suffering anyway, it’s like someone has switched the light off for June.”

However, Thomas Cook director of trade relations Ian Derbyshire said this season should escape.

“Any increase in interest rates doesn’t help in terms of consumers’ decisions to purchase big ticket items,” he said. “However, if individuals have already made their mind up to travel this summer I don’t think the rise will put them off.”