High inflation continues to help push nation into debt

Today's announcement by The Bank of England that inflation has dipped slightly to 4.8 per cent in November is good news for hard pressed households; although it is unlikely to relieve much of the financial pressure many consumers are facing. Research from MoneySupermarket.com found that almost 10 million UK consumers will be tipped into or be pushed further into debt this festive season.

As well as the financial impact of the high cost of living, savers have also suffered due to the eroding effects of inflation on their savings pot combined with low interest rates. To beat inflation, basic rate tax payers now need an account paying at least 6.01 per cent to gain benefit in real terms from their savings, increasing to 8.01 per cent for higher rate tax payers, and 9.61 per cent for 50 per cent tax payers.

Kevin Mountford, head of banking at MoneySupermarket.com said: "The rising cost of living is something UK households have had to bear the brunt of over the last few years, with rising energy, fuel and food costs putting significant pressure on the nation's wallets. It is no surprise that a high number of people will be tipped into debt this festive season, and consumers really need to take immediate steps to manage debt, especially in the current economic climate.

"With inflationary pressures starting to ease slightly over the past couple of months, and predictions of further falls towards the Bank of England's inflation target of two per cent in 2012, it is imperative that households take the opportunity to bring their finances under control. Sitting down and going through your finances and reviewing all your outgoings can really make a difference. Switching to cheaper products or moving expensive debts over to cheaper forms of borrowing, can help free up cash which is vital at a time when the cost of living has been putting the nation's wallets under severe pressure.

"For savers, the low number of products which currently offer a return above inflation, means keeping a closer eye on their interest rates. Being prepared to switch savings products is now more important than ever. Even if savers can't beat inflation, the difference between the average and top paying rates is considerable, so switching to a better deal can help to limit the impact on their savings pots."