Number of people going insolvent is predicted to have jumped to six-year high
The number of people whose finances have deteriorated to the extent that they have become insolvent is predicted to have jumped to a six-year high in official figures.
The Insolvency Service is due to release figures for the second quarter of 2018 on Friday.
Audit and restructuring services provider RSM predicts that, across England and Wales, there will have been 27,600 personal insolvencies in the second quarter.
This would be the highest quarterly figure since the first three months of 2012 as well as a 20% increase compared with the same quarter a year earlier.
It expects its predicted total to be comprised of around 4,100 bankruptcies, 16,500 individual voluntary arrangements (IVAs) where money is shared out between creditors, and 7,000 debt relief orders (DROs) - a type of insolvency aimed at people with relatively low levels of debt but no realistic prospect of paying it off.
Alec Pillmoor, a personal insolvency partner at RSM said: "These figures are surprising, as you wouldn't expect such a significant year-on-year rise in insolvencies at a time when interest rates are so low, employment levels are at a record high, and wage inflation is tracking above price inflation."
Commenting on the high predicted number of IVAs compared with bankruptcies, he said: "People appear to be taking pro-active steps to commit to paying down their debts over a five-year period using an IVA rather than going down the bankruptcy route.
"New data published this week by the Insolvency Service revealed that the most common reasons cited by people for filing for bankruptcy were living beyond their means, relationship breakdowns, a reduction in income or a loss of job.
"Unexpected life events can of course happen to anyone, but too many people fail to consider the risks when they are applying for credit."
He continued: "Borrowers will be keeping a close eye on the Bank of England's decision on interest rates in August.
"If rates do rise, the uplift is likely to be modest, but for those already struggling to meet repayments when they fall due, this could push them over the edge."
