The number of declared bankruptcies in the UK hit a 10-year high in the second quarter of this year, suggesting the number of repossessions may increase significantly by 2004.
Despite record lows in terms of borrowing costs, the Department of Trade and Industry reported there were 8,889 insolvencies between April and July, up 14% on the previous year and the highest since the first quarter of 1993.
The news has increased fears that low interest rates and continued house price rises are putting a strain on the economy, as an increase in either rates or unemployment is likely to trigger further bankruptcies and an increase in repossessions.
The announcement is contrary to assertions from the Department of Constitutional Affairs. It said 10,028 mortgage possession actions were made in the second quarter of 2003, a 3% decrease on the same period last year. And the Council of Mortgage Lenders (CML) said possessions by mortgage lenders were down 37% on the first half of 2002.
However, Michael Coogan, director general of the CML, acknowledged personal borrowing is at a high level.
He said: ‘Interest rates are expected to rise next year, albeit modestly, and economic uncertainty remains. We would urge all borrowers, and especially those who have bought recently and carry high levels of debt, to ensure they are building in enough flexibility¦to cope with high mortgage repayments.’