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2007 to See a Rise In Bad Loans According To Banks

A survey by PricewaterhouseCoopers, in conjunction with the CBI, has revealed that almost 30 per cent of UK banks and over 75 per cent of building societies predict a rise in bad loans during the first three months of 2007.

John Hitchins from PricewaterhouseCoopers, said: 'We know there has been a problem with bad loans rising in 2006 and one third of banks are still saying they think it will keep rising because of the level of personal insolvencies.'

Mr Hitchins issued a not of warning saying that the UK financial services industry had witnessed five successive quarters of growth in 'non-performing loans' which also includes credit cards.

Last year saw record levels of personal bankruptcies and IVA's (individual voluntary arrangements) as UK consumers struggled to cope with their personal debts, including unsecured loans and credit cards.

According to Mr Hitchins the number of IVA's in the UK is a source of 'major concern' for the UK banking industry. He added that there are indications that IVA's are 'being applied to the wrong type of people.'

'Traditionally the main reason for people defaulting on loans is divorce or unemployment but this time people are unable to pay their debts because they have simply borrowed too much,' added Mr Hitchins.

Last week accountants Grant Thornton predicated that almost 30,000 Britons will file for insolvency in the first quarter of 2007, which will be due to a 'rise in customer delinquency' says Mr Hitchins.

Many experts feel that some UK consumers borrow and intend to borrow irresponsibly as they feel they have a safety net to fall back on in IVA's and bankruptcy. A trend seems to be emerging among some consumers that they can write off debt or come to an arrangement with their creditors if they struggle to repay their debts, a policy that is costing the financial service industry in the UK a considerable amount of money

Alisdair Milton
12th January 2007


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