Mitchell Charlesworth issues insolvency warning

Date: 31 May 2007

RISING interest rates and increasing unsecured debts could push more people into insolvency, warns Mitchell Charlesworth Chartered Accountants and Business Advisors.

Insolvency experts at the firm believe rising interest rates could threaten the stability of the local economy and hit homeowners and borrowers across Widnes.

The Bank of England’s Monetary Policy Committee (MPC) recently hiked interest rates up to 5.5 per cent, their highest level for six years.

While official insolvency figures for the first three months of 2007 revealed that 30,000 people went bust in England and Wales – a new record.

Jeremy Oddie, a Mitchell Charlesworth partner, believes the second 0.25 per cent rise this year could be followed by another increase later in 2007 as the Bank of England struggles to keep a cap on inflation.

He said: “Our insolvency team has been busier than ever and that reflects what’s happening not just nationwide but right across the North West and right here in Widnes and Runcorn.

“Until a few years ago interest levels were low, which meant smaller mortgage repayments and utility bills, so more people had larger amounts of disposable income to spend. However, the big concern is that the recent half a percentage point rise in rates would add £60 a month to a £150,000 repayment mortgage, and that could push many people over the edge.

“The recent rise in interest rates to 5.5 per cent has left more people robbing Peter to pay Paul. They’re having to pay more off their mortgage so they can’t pay as much off their credit cards.

“Unfortunately, the attitude today is buy now and pay later, with more people than ever before using credit, and if there are any more interest rate rises this year it’s going to be too late for some. People can keep on top of their finances by simply tightening their belts, reducing their non essential spending and not incurring any more credit.

“Borrowing is now the most expensive it’s been for the last six years and there is no sign of it slowing – and it’s going to get worse before it gets any better. And if there is a another quarter per cent interest rate rise before the end of the year it will hurt a lot of people, but another rise beyond that could start to undermine the economy.”

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