Insolvencies on the increase
Figures published by The Insolvency Service have revealed that the number of people declared insolvent has risen for the first time in over 12 months in the first 3 months of 2008.The figures show that 25,264 people have been declared insolvent, which represents a rise of 1.7% compared with the last 3 months of 2007.
Furthermore, there were 9,614 Individual Voluntary Arrangements (IVAs) and 15,651 bankruptcies reported during the period.
According to uSwitch, the price comparison and switching service, individual insolvencies could reach 101,056 by the end of 2008.
Ann Robinson of uSwitch.com said it is worrying that so many people are resorting to individual insolvencies, be it an IVA or bankruptcy, to resolve their personal debt problems.
These measures should always be the last resort for anyone with financial problems as they have a very serious impact on people's credit histories and their ability to borrow in the future. In the case of bankruptcy, it could also impact on employment prospects, added Ms Robinson.
In addition, the number of liquidations for companies increased by 2% over the same three months in comparison to last 3 months of 2007 to 3,210.
The impact of the credit squeeze is just starting to take affect now as it takes many months for tightening lending restrictions and increased mortgage repayments to hit consumers and then be recorded in official statistics.
Figures from the Council of Mortgage Lenders (CML) show that there were 27,100 repossessions in the UK last year, below the 30,000 the council had forecast.
However, a sharp increase is expected this year with the CML predicting there will be 45,000 repossessions this year. This will represent the highest figure since 1995 when the market was recovering from the crash of the early 1990s.
According to Global Insight economist, Howard Archer, the worst of this is yet to come. He said while the rise in individual insolvencies was relatively modest in the first quarter of 2008, the situation seems set to deteriorate significantly further over the coming months as the financial pressure on many households is increasing appreciably.
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