Bad Debts Down But Expected To Rise
March 5th 2008
UK households 'bad debts' are expected to rise in the coming year, as Brits spend two years of their lives worrying about debt.
The Capital Economics Bad Debt Index shows bad debts fell in the final quarter of 2007 – but they are expected to increase in 2008.
The index headed down to 100 points at the end of the year – compared with almost 400 points in 1993. However, by 2009 the bad debt measure is forecast to strike 200 points.
Over the second half of 2007 mortgage arrears rose, along with unsecured debt write-offs. However, all over measures of bad debt fell.
Vicky Redwood, UK economist at Capital Economics, said: "[Our data] suggests that bad debt should now start to rise again.
"This reflects the rises in interest rates back at the end of 2006/start of 2007, which outweighs any positive effects from the falls in unemployment seen then.
"What's more, the recent credit crunch will only start to affect bad debt towards the end of 2009, suggesting that bad debt could keep rising until 2010 at least."
She added the number of people affect by bad debts would remain small as a share of the population, but a renewed rise in bad debt could have further knock-on effects.
"A renewed rise in bad debt could have much wider implications if it makes lenders more cautious about extending credit – boosting the chances of a vicious circle of rising bad debts, tighter credit conditions and falling house prices," Ms Redwood said.
Meanwhile, a poll by the Co-operative Bank shows the British population spends 13 billion hours a year worrying about debt – adding up to two years of their lives.
Scott McPhail, savings product manager at the Co-operative Bank, said: "It is worryingly clear from the research that the vast majority of UK adults are deeply concerned about their finances, with rising levels of debt and inadequate saving provisions responsible for countless sleepless nights nationwide."
News Source :http://www.myfinances.co.uk
