Figures released by the Insolvency Service show that the number of individuals that have declared insolvent has dropped to a ten year low, and also said that the number of businesses that have declared as being insolvent has fallen to the lowest figure in seven years. The news has been attributed to a strengthening of the economy, and an increase in real wages.
Recent figures show that the economy may genuinely be bouncing back. GDP has increased for the tenth consecutive quarter, while business lending is down. Mortgage interest rates that are being offered to potential buyers is also low, while household borrowing has increased. Although there are still areas where improvement has yet to be properly witnessed, the overall signs are certainly positive, and the news that both individual and business insolvencies have dropped is bound to further fuel the argument that the economy is looking up and the future is brighter once again.
18,866 individuals became insolvent between April and June in England and Wales while, at the same time, the number of people that were accepted for mortgages increased. 66,582 new mortgages were taken out in June, which was an increase from 64,826 in May. The number has almost reached April’s peak of 68,051.
The number of individual insolvencies represents a 29.3% reduction on the same period 12 months earlier, and is backed up by a drop in business insolvencies too. 3,908 firms went bust over the same three months, and is the smallest quarterly number since the end of 2007.
Although the news has widely been seen as positive, experts have warned against complacency, primarily pointing to the increase in personal borrowing. They have said that individuals may now be able to borrow more in order to stave off insolvency for a little longer, and also warned that changes to tax credits in the coming year could make things worse for a lot of people. The Office for Budget Responsibility has said that it expects household debt to reach an average of 169% of household income by the year 2020.