UK Bankruptcies and repossessions are rapidly rising
Pastor Dale Morgan
UK Bankruptcies and repossessions are rapidly rising*
By Caroline Gammell
Last Updated: 3:07am GMT 03/11/2007
The number of people filing for bankruptcy rose by two per cent in the
past three months to more than 15,000 as the global credit crunch
started to hit, figures have revealed.
Although the number declared insolvent fell by five per cent over the
same period, financial analysts warned this would not last once interest
rate hikes hit people's pockets.
Several experts expressed fears that the economic turmoil would see more
people struggling to pay their debts and putting their houses at risk.
Home owners have been hit by five interest rates increases since August
2006 when the base rate hit 5.75 per cent.
The government figures revealed there were 23,806 mortgage repossession
orders in the third quarter of this year, a 3.5 per cent increase from
the previous quarter.
David Stubbs, a senior economist at the Royal Institution of Chartered
Surveyors, warned that this figure would only rise: "The number of
people entering the early stages of the repossession process remains at
elevated levels. As the market slows into 2008 we expect the numbers
falling behind on their mortgage repayments to increase. We forecast
that this will lead to 43,000 repossessions in 2008."
Earlier this week, the Council of Mortgage Lenders warned that the
number of homes repossessed during 2008 looked likely to reach levels
last seen during the 1990s house price crash.
Howard Archer, an economist from the analysts Global Insight, said: "The
full effect of the marked overall increase in interest rates since
August 2006 is still feeding through with a substantial number of home
owners now seeing their mortgage bills rise markedly as the cheap fixed
rates that they took out in the second half of 2005 expire."
The global economy is unsettled after the sub-prime mortgage crisis in
the US which has made UK lenders far more risk averse.
With the banks tightening lending criteria, the number of Individual
Voluntary Arrangements (IVAs) dropped dramatically by 14.3 per cent in
this quarter compared to the same period last year. IVAs are debt
arrangements spread over several years which do not pay off all the
debt. They are seen as a way of avoiding bankruptcy and do not carry the
same stigma.
James Ketchell, from the Consumer Credit Counselling Service said
bankruptcies had increased because people refused IVAs had no other option.
The figures showed there were 26,072 personal insolvencies in England
and Wales - people who were either declared bankrupt or took out an IVA
- which was down three per cent on the previous quarter.