It has been revealed in a recent report that more than half of UK families are now struggling to repay their debts, and this could get worse as living costs continue to increase. The research results have been released on the back of warnings from the Bank of England that the cost of living is set to increase. This will put even greater strain on households that are already struggling with their finances.

Mervyn King, the governor of the central bank, said that the increase in living costs was down to a number of factors, including soaring commodity prices, rising power bills, and the up and coming VAT hike that will see VAT increase to 20 percent at the start of next year. The Bank of England also revealed that more than 50 percent of families in the UK were already struggling to keep up with debt repayments, and these rising costs could make the situation even worse.

Around 51 percent of households in the UK are now said to be struggling with their debts and finances, and this is said to be the highest on record with the Bank of England, which started keeping records fifteen year ago. The central bank warned that inflation is likely to rise and remain high for longer than had been predicted just a few month ago. King said that businesses were having to pass on soaring import costs to customers, which would put further pressure on inflation.

Inflation currently stands at 3.1 percent, and this is considerably higher than the 2 percent target set by the government. The Bank of England now believes that inflation will not all back to its target level of 2 percent until at least 2012.