THOUSANDS of Scots will be “tipped over the edge” into serious financial difficulty or bankruptcy by even the smallest rise in interest rates that will send the cost of borrowing up, experts have warned.

The Bank of England Monetary Policy Committee (MPC) is expected to raise interest rates for the first time in a decade from 0.25 per cent to 0.5 per cent when it meets on Thursday.

The last time the MPC raised rates was July 2007, when it increased them a quarter of a point to 5.75 per cent.

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By March 2009, rates had been slashed to a then record low of 0.5 per cent in response to the credit crunch and stayed there for more than seven years.

They were then halved after the Brexit referendum to 0.25 per cent.

However, with inflation climbing to 3 per cent, well above the MPC’s two per cent target, the market believes that rates will be hiked in the the first in a series of slow, gradual increases.

But with more than one-third of Scots worried about the amount of money they owe and, with personal debt at its highest level for five years, it is feared the rise will push many over the edge as repayments cost more.

Figures from the Money Charity show the average household now owes £56,460, which is equivalent to more than 144 per cent of their annual income - the worst picture since mid-2012.

Now Mike Dailly of the Govan Law Centre, who is a former member of the Financial Conduct Authority’s Consumer Panel and a member of the European Banking Authority’s expert group has warned of the dire consequences that even a small rise will have on thousands of Scots.

He said: “There would be a lot more losers than winners from a base rate rise. We have 8.3 million people across the UK with problem indebtedness.

“They’ve had to borrow to cope with low wages, the gig economy and exponential household prices for food and bills. A rate rise right now could tip them over the edge when they’re already seriously struggling and financially squeezed”.

“It’s understandable that the Bank of England wants to put a brake on inflation running at 3per cent this year.

“But increasing the cost of borrowing won’t calm inflation. The reality is Scotland and the UK relies on imports, and you get inflation when the pound is devalued.”

But David Cameron’s former Pensions Minister Baroness Ros Altmann, CBE, said it was now time for rates to go up to protect savers and pensioners who have investments.

She added: “The Bank of England’s policy ultra-low interest rate policy has encouraged people to borrow rather than save.

“With so many banks or lenders trying to entice people into taking out loans with zero percent initial rates, there has been a sharp rise in consumer debt.

“Unfortunately, despite the low official rates, banks and credit card companies are still charging extremely high interest rates to borrowers, once any initial teaser rates have expired.

“An economy cannot thrive in the medium term with excessive levels of debt and falling domestic savings. People need to be able to afford to repay their borrowings and also need savings to tide them over any difficult periods that are bound to arise at some stage.

According to price comparison website MONEYSUPERMARKET, three-quarters of adults have unsecured debt in the form of personal loans, bank overdrafts or credit card balances, and one-third of them admit to relying on credit to get by every month.

More than one-third of those who owe more than they did last year put it down to the rising cost of living, including transport, bills and groceries.

However, a similar proportion confess they have only themselves to blame as they overspend on luxuries, while one-tenth said they are unable to control their spending.

David Thomson Chief Investment Officer at VWM Wealth in Glasgow said: “A move from 0.25per cent to 0.5per cent doesn’t seem much but it flags a possible direction of travel for savers and borrowers that will worry that more interest rate increases are in the pipeline.

It will be interesting to see how sensitive the UK economy is to an interest rate rise. Many mortgage borrowers are on fixed rates where increases will not be felt for a number of years. However with credit card debt and consumer finance at all time highs as consumers have borrowed to finance their lifestyles while inflation has outstripped wage growth an increase to rates will be acutely felt.

But Alex Edmans, head of product for Saga Money said: “The interest rate policy over the last 10 years has severely punished our members who have done the right thing and built up their savings to help them live the life they want to throughout their retirement.

“As people scale back on work in later life, they become much more reliant on their savings to boost their monthly income. “A rise in interest rates would be warmly welcomed and would boost confidence to allow people to keep doing the things they enjoy, which also has the added bonus of boosting the economy further.”