Bad debts continue to rise
Bad debts in the UK are continuing to rise according to recent reports, with sharp increases so far this year compared to the same periods last year.
The first quarter of the year has seen bad debt levels rocket in England and Wales, with some suggesting that the problem could have been made worse due to higher living costs and rising interest rates resulting in increased mortgage and secured loan repayments. Just over thirty thousand people declared themselves bankrupt between January and March of this year, which reflected a twenty four percent rise compared to the same period last year.
Bankruptcies went up by ten percent in this period compared to the same time last year. A particularly steep rise was seen with Individual Voluntary Arrangements (IVAs), which went up by 48% compared to the same period last year. This could be partly due to the fact that many IVA companies are putting out glossy advertisements, making the benefits of IVAs more widely known, although many have been criticized for failing to inform consumers about the downside of such action.
Howard Archer from Global Insight stated: 'Even allowing for the fact that the emergence of IVAs has made it more attractive for people to register as insolvent to deal with their financial problems, the data highlight the fact that a significant number of people have borrowed to their limits and are in a very vulnerable position. Rising interest rates, elevated utility bills, limited real disposable income growth, the fact that many people have stretched themselves to the limit to buy a house and record high debt levels have contributed to the rise in individual insolvencies.'
Adding to the financial strains for consumers are rising interest rates, which have already been hiked up four times in the space of nine months, and are expected to rise again in the summer.
Tom Smith
25th May 2007
More Information:
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