William Kay: We may be facing a slow torture of thin interest rate rises

First things first: a round of applause to Nationwide building society for being so quick off the mark to ensure its savers benefit from the Bank of England interest rate rise. Nationwide is also increasing its mortgage rate by more than the Bank's 0.25 per cent increase, but I hope others will be shamed into giving savers their due promptly.

That will put more spending power into savers' pockets, which militates against the Bank's avowed aim to take the heat out of consumer demand. The bigger question is whether 0.25 per cent is enough to deter borrowers from their spending spree.

I suspect it probably won't, especially as we are running into the Christmas season when people are more inclined to say to hell with it, let's have a good time and cope with the bills later. A 0.5 per cent rise would have had a better chance of stopping spenders in their tracks, so the Bank, understandably, did not want to bring the UK economy to a shuddering halt. But if this week's rise is too puny to bother macho spenders, then I believe we are in for slow torture, turning the screw a little at a time until we curb our shopping frenzy.

This means that it is not too late to remortgage into a fixed-rate deal lasting a couple of years, or a discounted rate as long as the escape penalties are not too severe.

* Further thoughts on the Child Trust Fund, for which the government trumpeted details last week. There is a distinctly Dickensian flavour to the fact that, as things stand, under no circumstances can a child or its parents touch the money until the child reaches 18. Even, I am told, if a child falls prey to an incurable illness and has only six months to live, the money will be released into the estate only on death. While that will be heart-rending but very rare, I fear that the Treasury in its ivory tower has not appreciated the greater likelihood of poverty-stricken families pleading with banks and building societies to borrow against a CTF account to pay for shoes or other essentials.

With 700,000 children a year being born in Britain, and a backlog stretching back to September last year, there are bound to be thousands such cases cropping up.

But the rules are clear: in true workhouse tradition, such supplicants must be turned away, to take their chance with street-corner loan sharks.

The only difference, in this media-savvy age, is that the parents in question are capable of contacting a newspaper or TV station to pour out their woes, leaving the bank or building society to blame the rules for their heartlessness.

And then there is the point about 18-year-olds being able to spend the fund proceeds how they please. The Government piously hopes that by the time the first funds mature in 2020 children will be so financially educated that they will not splurge it on a two-week sex and drug fest.

I predict that teenagers in 2020 will be as pleasure-bent as their present-day counterparts. This will panic the Chancellor of 2018 or so into passing a Child Trust (Amendment) Act with strict limits on how the money can be spent.

w.kay@independent.co.uk

William Kay is Personal Finance Editor of 'The Independent'