Consumers are entering into a “new period of debt”
Around 20 per cent more people became insolvent during the third quarter of this year compared to 2015, a report has found.
According to new data, 2016 recorded a spike in Individual Voluntary Arrangements (IVAs), as experts say consumers are entering a “new period of problem debt”.
During the three months to September, a total of 24,251 personal insolvencies in England and Wales were recorded, up six per cent on the second quarter, and 20 per cent more in a like-for-like comparison from last year.
IVAs increased 28.8 per cent in the third quarter compared to the same period in 2015, and 10.9 per cent more than the second quarter.
Experts predict that the increase in personal insolvencies might suggest that consumers are entering into a new era of debt.
The strength of the pound, low wages, and the increasing costs of living mean some consumers may find themselves in difficult situations, they said.
Andrew Tate, president of insolvency and restructuring trade body R3, said that the reforms to personal insolvency procedures had combined with existing problems to push the numbers upwards.
He said: “Individual Voluntary Arrangement numbers, which make up the bulk of personal insolvencies, are sensitive to the cost of living. IVAs fell rapidly from 2014 onwards as wage growth finally overtook inflation after the financial crisis. Having plummeted towards zero per cent in 2015, inflation has been rising again this year and IVA numbers have followed.
“Consumer debts are on the rise and savings rates are incredibly low so it’s very easy for even a small financial shock to make someone insolvent.”