The problem is, the government (which is always linked to the BoE, even though they aren't) will always be blamed when rates go up and people cannot afford their mortgages. Its the horrible moment when Fiscal & Monetary policy hit each other. In a purely fiscal way, under some of the projections i've seen, the best thing to do is to jump the rate, up to .75% or even 1%, and get all the people who would default, to do it as quickly as possible, so you can then organise the debt via proper instruments. This then makes it a lot easier to properly restructure payments etc, rather than having a drip feed of people defaulting on their debt over time. There has to be a point soon, where people learn how to spend within their means though, you cannot keep penalising savers, because other people have £10,000 on their credit cards, and can't afford their gas bills.