Rising insolvency due to a number of factors

A recent report has suggested that many industry officials expect insolvency levels to rise over the coming year, despite the fact that there was a drop in the number of people becoming insolvent in the last quarter of 2007.

This drop, which equated to around 16.4% compared to the same quarter in the previous year, has been described as the calm before the storm.

Some industry officials have predicted that there could be around 130,000 people becoming insolvent over the course of this year, and the increase in insolvency levels has been blamed on a number of factors, including higher debt levels, higher living costs, tighter lending conditions, and the effects of the global credit crunch.

One industry official stated: ‘We are forecasting small increases in unemployment as the economy slows, so we would expect the insolvency data to pick up over the course of 2008.

There is also a risk that the effects of the credit crisis will exacerbate the magnitude of any future increases, as subprime borrowers struggle to refinance loans as they roll off more favourable deals.’

The report also suggested that an increasing number of people are now making themselves insolvent rather than doing this on the advice of creditors or other industry professionals, which could also add to the rising figures.