RESEARCHERS from the University of Stirling have warned that interest rate hikes can damage the mental health of people in debt.
The news has come ahead of a Bank of England rate-setting meeting this week, with rates expected to remain unchanged before a rise in May.
Researchers at the universities of Stirling and Nottingham, conducted a study involving more than 15,000 people in the UK.
Funded by the Economic and Social Research Council and published in the Journal of Affective Disorders, the study found that for each one per cent increase in interest rates, there was a 2.6 per cent increase in the incidence of mental health issues experienced by those heavily in debt. UK-wide, researchers estimated each percentage point increase would result in 20,000 additional cases of mental health difficulty – at an overall cost to society of £156 million.
Lead researcher, Dr Christopher Boyce from the Stirling Management School, believes the study – which is the first of its kind – has important implications for economic and social policy.
He said: “Whilst it is important to avoid high unemployment and instability – which in themselves can be detrimental to mental health – central bankers need to understand that the tools they use to maintain economic stability can also have direct consequences to mental health.
“Low interest rates encourage the uptake of debt, potentially creating unsustainable debt levels and putting many at risk when there are future interest rate rises. When this happens, we need to ensure those in debt receive adequate support.
“One way to improve the economy, as others have argued, while at the same time reducing the mental health risk for individuals, would be to give people money in the form of a debt jubilee.”
Bank of England governor, Mark Carney, has already warned borrowers that rates will need to rise “somewhat earlier and by a somewhat greater degree” to meet inflation targets.
Source: The National