The jump in consumer price inflation to 3.1% in March will hit consumers hard and could lead to a significant increase in bad debt and mortgage repossessions, according to Business Strategies, the independent global economic consultancy arm of Experian.

“The rise in inflation heralds a further increase in interest rates to 5.5% or even 5.75%, with more increases possibly on the way,” said Dr Neil Blake, managing director of global economic forecasting at Business Strategies.

He continued: “Not only will interest rate rises have a dampening effect on economic growth and inflation, but there will also be a likely knock-on impact on bad debt.

“This is something that lenders will be very aware of, but many consumers will also need to consider carefully their future financial circumstances while assessing their financial position.”

Blake also pointed out that the Monetary Policy Committee (MPC) at the Bank of England – the group that sets the Bank Rate upon which lenders’ interest rates are based – has to take on board the financial stress caused to consumers by its decisions.

He added: “Our analysis shows that we might not be that far away from record, or near record, highs for write-offs and repossessions and it is fair to say that the way consumers and financial firms will react is not certain.”