Record numbers of people will become insolvent over the next two years accountancy firm KPMG announced this week.
They claim that at least 130,000 people will become bankrupt or take out an individual voluntary arrangement during 2008.
An IVA is a legally bound agreement that ensures creditors will not take insolvency action against whilst a debtor pays what he can afford for an interim period. Approximately two thirds of people who enter into an IVA are homeowners.
KPMG also predict that there will be a record-breaking 40,000 people going bankrupt or entering into an IVA in the first quarter of 2009 – 10,000 people more than in the same period last year.
KPMG state that rising mortgage costs and general day-to-day living will tip most people over the edge.
With the average mortgage standing at £158,000 and energy and food bills rising at an inflation busting pace, many families will need to pay out at least £2000 more per year to avoid going under financially.
Figures for insolvency in January to March this year shows that there was actually a small fall in insolvencies, this however seems to be only a temporary respite.
Economic growth fell to 0.4% in the first quarter of this year – in the same period last year it was 0.7%
This suggests that the Chancellor – Alistair Darling will not meet his forecast of 2% growth for 2008, outlined in April’s budget. Economists all seem to suggest that this is only the beginning of a deep and prolonged economic slowdown.