According to the Bank of England’s November Inflation Report, secured debt levels have remained historically low, despite a slight rise in mortgage arrears, while unsecured debt was causing some households particular problems.
The report stated: “Some indicators suggest that the number of households facing repayment difficulties has risen. The number of insolvencies has more than doubled in the past two years, and the amount of debt written off by banks has also increased sharply. Difficulties with secured lending have so far been less apparent.”
According to the findings, secured debts were a problem for 8 per cent of those questioned, compared to one-in-six who said they had problems repaying debts in general.
However, the Bank of England admitted it was unsure whether the rising number of insolvencies was due to more borrowers encountering debt problems or the greater availability of Individual Voluntary Arrangements (IVAs).
Peter Charles, economist at Mortgage Express, believed mortgage lenders were relatively happy with levels of secured debt.
“On the secured side, we are happy things are under control. The problems in the credit sector have been in unsecured debt but people are recognising this now and, especially credit card companies, are limiting the levels of debt they will allow people to take on.
“In terms of insolvencies, it is more to do with the relative ease of getting an IVA and the slightly misleading notion given by some companies that they are a way of solving all your debt problems.”
