Falling personal insolvency rates are the recession’s long tail

New statistics released by the Insolvency Service for July – September 2014 show that overall, formal personal insolvencies – that’s bankruptcies, debt relief orders and Individual Voluntary Arrangements (IVAs) – have fallen again, after a slight upward blip in April-June this year.

But the statistics also show that, although the individual insolvency rate had decreased each quarter since mid-2010 (with that one exception in Q2 2014), the rate is still up compared with rates before 2004.

So should we be reassured because numbers are coming down?

Debt Advice Foundation chief executive David Rodger commented: “Our concern is that these figures represent the tail end of the effects of the banking crisis – all of those people who lost their income as a result of businesses going under in the recession have now worked their way through the statistics.

“What we are seeing now are new trends, which have yet to register in the insolvency figures.  People are reaching retirement age without any way of paying off their interest-only mortgage, or the outstanding balances on their credit cards.  Others who used to be employed are now freelance or on limited contracts – so the risks around their borrowings are much higher.  More and more people on fixed or low incomes are struggling with rising gas, electricity and food bills.

“And of course interest rates will be rising soon – something which is likely to push thousands of families into insolvency. Surveys regularly show that most people do not have emergency savings for everyday things like their car breaking down – they have certainly not started budgeting for an increase in their mortgage, rent or credit charges. 

“We are extremely worried that this apparent plateau in insolvency is actually a lull before a new storm of unmanageable debt problems.”

For the full Insolvency Service story, see the press release and other documents here