Start of year sees insolvency levels rise
According to a recent report the first three months of this year have seen individual insolvency levels rise, with an increasing number of people entering into insolvency plans as a result of difficulties with household finances, which have been strained for millions over recent months. A combination of high mortgage repayments, rising bills, increased living costs, and tight credit conditions have all contributed to the rise in insolvencies according to industry professionals.
Industry officials have been predicting for some months that insolvency levels would rise because of the global credit crunch and rising financial commitments amongst households. The rise in individual insolvencies for the first three months of this year compared to the previous three months was only a small one of 1.7% resulting from increased IVAs. However, insolvency levels for the first quarter of the year were 13.2% lower than the first quarter of last year.
The number of bankruptcies for the first quarter of this year rose only by 0.1% compared to the previous three months, but were down by 6.8% compared to the first quarter of last year. The number of IVAs increased by 4.3% compared to the previous three months, but was down by 22% compared to the same period last year. This has resulted in a slight overall rise for the first three months of this year compared to the last three months of 2007.
There are concerns that overall insolvency levels will continue to rise over the course of this year, and this is because households are still struggling with their finances, with costs such as petrol, food, and bills having risen sharply over recent months. It is thought that a recently introduced amnesty between banks and IVA groups may also have resulted in the slight increase in this softer form of bankruptcy.
Officials have stated that it is currently not as easy for consumers to try and avoid insolvency because of the increasingly tight credit conditions in place, which means that they often cannot shop around for a cheaper deal, particularly if they have damaged credit. One official recently stated: “This latest increase in personal insolvencies shows the financial strain being wrought on individuals from a combination of high living costs and tighter lending conditions. It is a tough year to be struggling with debt.”
Industry experts have also said that the tighter credit conditions being operated be lenders are set to get worse as the global credit crunch continues to wreak havoc in the money markets over the course of this year. As a result of this many people may find themselves having to resort to insolvency in the latter part of the year, and this is when a sharp rise may be seen in insolvency levels. However, interest rates are expected to be cut a further couple of times over the course of the year, and this could help to bring some degree of balance to the finances of some households.
Recent additions:
- Credit crunch leads to increase fraud on finance applications
- Lenders need to be more cautious
- The credit squeeze continues
- Is debt consolidation the answer?
- CAB still dealing with many debt enquiries
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