The number of people becoming personally insolvent in England and Wales has risen for the first time in a year, according to figures released by the Insolvency Service. After four consecutive quarters of falling personal insolvency levels, this increase reflects the fragility of the economic recovery.
Although these numbers are up on last quarter, this total is actually 12 per cent less than the same point last year, and represents the fourth consecutive quarter of year on year falls.
RSM Tenon now predicts that the number of personal insolvencies this calendar year will be in the region of 120,000 - the lowest tally since 2008.
“Despite the recent negative or stagnant growth in the economy, the fact that unemployment figures remain hundreds of thousands higher than before the recession, and the fact that government spending cuts are starting to bite, the number of people hitting the financial rocks has only now shown signs of the strains of the public sector cuts combined with increased costs of living and falling real incomes,” said Nigel Fox, Director of Personal Insolvency at RSM Tenon.
“It’s very likely that much of this is to do with the low interest rates, which have now been kept close to zero for a staggering 28 months, and look set to stay low in the near future. This particularly benefits homeowners: huge numbers of people the current economic climate would have left struggling to make their mortgage payments are saved from going under.
“It’s worth pointing out though, that people in rented properties seldom see the direct benefit of low interest rates, and neither do people with unsecured debts as interest rates on credit cards and bank loans have not followed the trend of the base rate. So the picture is complicated, and there are more factors influencing the current low number of personal insolvencies than the actions of the MPC.”
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Article sourced from: RSM Tenon
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