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Record debts could land a million in court this year as personal loans hit £1.4trillion
Record debts could land a million in court this year as personal loans hit £1.4trillion | the Daily Mail
By SAM FLEMING
Last updated at 02:02am on 5th April 2008
A million families will be hit by court judgments over unpaid debts this year as the credit crunch bites, experts predict.
More than 2,700 individuals a day are expected to face crippling county court decisions because they cannot afford to keep up on loans, credit card payments, and utility bills.
The parlous state of family finances highlighted in the estimate by leading accountants follows a decade-long borrowing binge that has pushed personal debts beyond a record £1.4trillion.
It is being exacerbated by a clampdown on lending by cashstrapped banks, whose profits are being slashed by the meltdown in the U.S. mortgage market.
Yesterday the Liberal Democrats estimated some 60,000 families are at risk of having their home repossessed because they cannot keep up with rising debt costs.
Making matters worse, almost 1,000 mortgage products were pulled from the market in the past week alone, with the number available more than halving since last year, while the cost of home loans continues to rise despite two Bank of England rate cuts.
Mark Sands, of accountants KPMG, said he expects a million county court judgments to be issued this year, up from nearly 800,000 in 2007.
His figure is nearly double the 538,383 judgments recorded in 2004 and would be the highest since the 1,042,720 in 1996.
County court judgments relate to unpaid debts including on credit cards, personal loans, car loans and store cards. They are often followed by visits from bailiffs, who can seize property in order to enforce the courts' decisions.
Figures for the first three months of the year are due next month.
Mr Sands said: "Everything points to more pain for the consumer, which will translate into increased county court judgments over the course of this year.
"If county court judgments go up anything like as quickly as we expect bankruptcies to go up, we could easily see a million of them this year."
He expects personal insolvencies to rocket to a record 130,000 in 2008.
Five years ago, the annual figure was 30,600. Insolvency expert Mike Gerrard, of accountants Grant Thornton, said: "We always expected to see high insolvencies in 2008, but the credit crunch has come on top of everything and will, if anything, make things even worse.
"You can expect to see personal insolvencies up in 2008, and one wouldn't be surprised to see county court judgments going in the same direction. I would expect a significant increase."
Recent Bank of England figures suggest families are still desperately trying to prop up their finances with loans and overdrafts.
Unsecured personal debts soared by £2.4billion in February, the biggest monthly rise for more than five years.
Many are being forced to extend overdrafts and borrow on credit cards as they struggle to keep up with mortgage repayments.
The Lib Dems calculated that 60,000 families are spending more than three-quarters of their disposable income each month on mortgage payments.
Rising income and council taxes and increases in mortgage rates could push many homeowners over the brink into repossession. These could approach the 75,000 in 1991, when the property market crashed.
Lib Dem Communities spokesman Julia Goldsworthy said: "As living costs rise, and the credit crunch starts to bite, families are forced to cut back on essentials to keep a roof over their heads.
"But ministers are not prepared to deal with the housing crash as the safety nets have been withdrawn. There are almost a million fewer social homes to rent than during the last recession."
Record debts could land a million in court this year as personal loans hit £1.4trillion | the Daily Mail
By SAM FLEMING
Last updated at 02:02am on 5th April 2008
A million families will be hit by court judgments over unpaid debts this year as the credit crunch bites, experts predict.
More than 2,700 individuals a day are expected to face crippling county court decisions because they cannot afford to keep up on loans, credit card payments, and utility bills.
The parlous state of family finances highlighted in the estimate by leading accountants follows a decade-long borrowing binge that has pushed personal debts beyond a record £1.4trillion.
It is being exacerbated by a clampdown on lending by cashstrapped banks, whose profits are being slashed by the meltdown in the U.S. mortgage market.
Yesterday the Liberal Democrats estimated some 60,000 families are at risk of having their home repossessed because they cannot keep up with rising debt costs.
Making matters worse, almost 1,000 mortgage products were pulled from the market in the past week alone, with the number available more than halving since last year, while the cost of home loans continues to rise despite two Bank of England rate cuts.
Mark Sands, of accountants KPMG, said he expects a million county court judgments to be issued this year, up from nearly 800,000 in 2007.
His figure is nearly double the 538,383 judgments recorded in 2004 and would be the highest since the 1,042,720 in 1996.
County court judgments relate to unpaid debts including on credit cards, personal loans, car loans and store cards. They are often followed by visits from bailiffs, who can seize property in order to enforce the courts' decisions.
Figures for the first three months of the year are due next month.
Mr Sands said: "Everything points to more pain for the consumer, which will translate into increased county court judgments over the course of this year.
"If county court judgments go up anything like as quickly as we expect bankruptcies to go up, we could easily see a million of them this year."
He expects personal insolvencies to rocket to a record 130,000 in 2008.
Five years ago, the annual figure was 30,600. Insolvency expert Mike Gerrard, of accountants Grant Thornton, said: "We always expected to see high insolvencies in 2008, but the credit crunch has come on top of everything and will, if anything, make things even worse.
"You can expect to see personal insolvencies up in 2008, and one wouldn't be surprised to see county court judgments going in the same direction. I would expect a significant increase."
Recent Bank of England figures suggest families are still desperately trying to prop up their finances with loans and overdrafts.
Unsecured personal debts soared by £2.4billion in February, the biggest monthly rise for more than five years.
Many are being forced to extend overdrafts and borrow on credit cards as they struggle to keep up with mortgage repayments.
The Lib Dems calculated that 60,000 families are spending more than three-quarters of their disposable income each month on mortgage payments.
Rising income and council taxes and increases in mortgage rates could push many homeowners over the brink into repossession. These could approach the 75,000 in 1991, when the property market crashed.
Lib Dem Communities spokesman Julia Goldsworthy said: "As living costs rise, and the credit crunch starts to bite, families are forced to cut back on essentials to keep a roof over their heads.
"But ministers are not prepared to deal with the housing crash as the safety nets have been withdrawn. There are almost a million fewer social homes to rent than during the last recession."
