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Debt may rocket by end of year in UK

According to a government report that was released earlier this month debt levels in the UK are set to soar by the end of this year, with current figures and debt levels reflecting the debt problems that continue to rise in the UK.

The reports indicates that in the second quarter of 2007 nearly 27,000 people took out an Individual Voluntary Arrangement or declared themselves bankrupt, which reflects a rise of 4.2% compared to the second quarter of last year.

One price comparison site, uswitch, has estimated that there will be a total 5% rise on 2006 by the end of this year when it comes to insolvencies, which it estimates will soar to over 112,000. The average level of unsecured debt per household in the UK is £8841, or for those with mortgages the average is £55,567. The UK has £1.3 trillion worth of debt, and with debt levels going up, interest rates rising, and many on below average incomes, more and more people are struggling to continue making repayments.

According to one adviser repayments on a variable rate mortgage have rocketed by 65% in the past five years. He also added that around twelve people an hour in the UK are now entering into either an IVA or declaring themselves bankrupt. One official stated: 'Today, with interest rates at 5.75% and the average mortgage at £140,447 costs have risen to £8,075 per annum, equivalent to 35% of an individual's average gross earnings and an increase of £4,362 since 2003.'

An official from uswitch stated: 'Consumers have a high propensity to borrow these days. There is a real risk we will see many more in serious financial difficulty if there are further increases to the base rate before the end of the year or if we experience a sudden change to our existing economic climate.'

Tom Smith
27th August 2007

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