Personal Insolvency Problems
Britain's debt crisis deepens as personal insolvencies rise almost 70 per cent to hit a new peak.
Figures for the three months to June rose 10 per cent on the previous three months and 66.3 per cent from the same period a year ago.
Mark Sands, director of personal insolvency at accountants KPMG, said: “Pressure could mount further as consumers face higher energy bills and rising interest rates.
"We predict a record number of personal insolvencies of 100,000 in 2006 and we
think the figures mean someone is entering formal insolvency every minute of the working day.”
Accountants Grant Thornton said insolvencies were "spiralling out of control" and predicted worse to come, with the level of house reposessions set to rise and banks tightening their lending criteria.
Mike Gerrard, head of personal insolvency at Grant Thornton, said: "Personal insolvencies have hit the roof and carried on rising, reaching an average of almost 9,000 per month when just five years ago they averaged 2,500."
According to official figures released today by the Government's Insolvency Service, 26,021 people became insolvent in England and Wales during the three months to the end of June.
News of the dramatic rise - for the second quarter in a row - comes after the Bank of England yesterday increased the cost of borrowing by 0.25 per cent to 4.75 per cent. The move was the first time the Bank had upped interest rates for two years.
While designed to head off inflation, the rate rise puts pressure on mortgage repayments for millions of households.
Today's figures also come as concern mounts that the nation's £1 trillion consumer debt bill is becoming increasingly unsustainable.
The Insolvency Service revealed that 11,105 individuals filed for Individual Voluntary Arrangements (IVAs) in the second three months of this year, up 153.2 per cent on the same period last year and 34.9 per cent compared with the January to March quarter.
Gaining an IVA means borrowers do not have to service their debt obligations in exchange for agreeing to pay off a set sum each month.
The lax new laws on bankruptcy have been blamed by leading high street banks this week for sparking a sharp increase in their provisions for bad and doubtful debts.
Leading high street banks HSBC, Barclays, HBOS and Lloyds TSB this week all reported double-digit percentage increases in impairment charges for consumer loans gone wrong.
Mr Gerrard, who also predicted that banks could further tighten their lending criteria, said: "What is of greater concern is that such [insolvency] rises have developed within a relatively benign economic context.
"Without wanting to be overly gloomy, it is undeniable that recent economic factors such as the rise in unemployment levels, ever increasing utility bills and, since yesterday, higher interest rates will all play a part in tipping yet more people over the edge and adding to the problem."
The number of companies going into liquidation fell 4.9 per cent from the first to the second quarter , to 3,265, the Insolvency Service said.
Howard Archer, chief UK and European economist at Global Insight, said today's figures "highlight the fact that many people have borrowed to their limits".
"With unemployment continuing to rise, utility bills soaring, many home owners stretched to the maximum and debt bills at record high levels, it seems highly likely that individual insolvencies and mortgage repossessions will climb markedly further over the coming months," Mr Archer said.
"This danger has been magnified by the Bank of England's raising interest rates this week."
The need for heavily indebted borrowers to improve their personal finances will be a "significant constraint" on consumer spending for some time to come, Global Insight said.
Property reposessions also recorded a steep year-on-year rise during the second quarter, according to separately released figures from the Government's Department of Constitutional Affairs today.
In the three months from May to July, the number of eviction orders was 22,254, according to the Government. This is up 21 per cent on the second quarter last year and slightly higher than the first half of this year. Half of those orders were suspended.
This followed the issue of 33,180 summons after borrowers failed to keep up with debt repayments. This figure was 17 per cent higher than the same period last year.
Figures for the number of houses actually repossessed are not yet available for this year but there has was a sharp rise last year, to 10,250, from 6,000 in 2004.
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Figures for the three months to June rose 10 per cent on the previous three months and 66.3 per cent from the same period a year ago.
Mark Sands, director of personal insolvency at accountants KPMG, said: “Pressure could mount further as consumers face higher energy bills and rising interest rates.
"We predict a record number of personal insolvencies of 100,000 in 2006 and we
think the figures mean someone is entering formal insolvency every minute of the working day.”
Accountants Grant Thornton said insolvencies were "spiralling out of control" and predicted worse to come, with the level of house reposessions set to rise and banks tightening their lending criteria.
Mike Gerrard, head of personal insolvency at Grant Thornton, said: "Personal insolvencies have hit the roof and carried on rising, reaching an average of almost 9,000 per month when just five years ago they averaged 2,500."
According to official figures released today by the Government's Insolvency Service, 26,021 people became insolvent in England and Wales during the three months to the end of June.
News of the dramatic rise - for the second quarter in a row - comes after the Bank of England yesterday increased the cost of borrowing by 0.25 per cent to 4.75 per cent. The move was the first time the Bank had upped interest rates for two years.
While designed to head off inflation, the rate rise puts pressure on mortgage repayments for millions of households.
Today's figures also come as concern mounts that the nation's £1 trillion consumer debt bill is becoming increasingly unsustainable.
The Insolvency Service revealed that 11,105 individuals filed for Individual Voluntary Arrangements (IVAs) in the second three months of this year, up 153.2 per cent on the same period last year and 34.9 per cent compared with the January to March quarter.
Gaining an IVA means borrowers do not have to service their debt obligations in exchange for agreeing to pay off a set sum each month.
The lax new laws on bankruptcy have been blamed by leading high street banks this week for sparking a sharp increase in their provisions for bad and doubtful debts.
Leading high street banks HSBC, Barclays, HBOS and Lloyds TSB this week all reported double-digit percentage increases in impairment charges for consumer loans gone wrong.
Mr Gerrard, who also predicted that banks could further tighten their lending criteria, said: "What is of greater concern is that such [insolvency] rises have developed within a relatively benign economic context.
"Without wanting to be overly gloomy, it is undeniable that recent economic factors such as the rise in unemployment levels, ever increasing utility bills and, since yesterday, higher interest rates will all play a part in tipping yet more people over the edge and adding to the problem."
The number of companies going into liquidation fell 4.9 per cent from the first to the second quarter , to 3,265, the Insolvency Service said.
Howard Archer, chief UK and European economist at Global Insight, said today's figures "highlight the fact that many people have borrowed to their limits".
"With unemployment continuing to rise, utility bills soaring, many home owners stretched to the maximum and debt bills at record high levels, it seems highly likely that individual insolvencies and mortgage repossessions will climb markedly further over the coming months," Mr Archer said.
"This danger has been magnified by the Bank of England's raising interest rates this week."
The need for heavily indebted borrowers to improve their personal finances will be a "significant constraint" on consumer spending for some time to come, Global Insight said.
Property reposessions also recorded a steep year-on-year rise during the second quarter, according to separately released figures from the Government's Department of Constitutional Affairs today.
In the three months from May to July, the number of eviction orders was 22,254, according to the Government. This is up 21 per cent on the second quarter last year and slightly higher than the first half of this year. Half of those orders were suspended.
This followed the issue of 33,180 summons after borrowers failed to keep up with debt repayments. This figure was 17 per cent higher than the same period last year.
Figures for the number of houses actually repossessed are not yet available for this year but there has was a sharp rise last year, to 10,250, from 6,000 in 2004.
Join the debate
Is bankruptcy really the only option? Click here to have your say
http://myvesta.org.uk
posted by Your Friends @ Myvesta.org.uk at
8/07/2006 11:02:00 pm
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