Official figures released today by the Insolvency Service have revealed that 20,383 people became insolvent in England and Wales in the first quarter of this year, a slight increase of 0.3% on the previous quarter but 2.2% lower than the same quarter in 2015.
Commenting on the new statistics, Mark Sands, personal insolvency partner at RSM said:
'Personal insolvency levels during the first quarter have remained fairly flat, reflecting the current strength of household finances and prolonged record low interest rates. As we expected, there has been a rise in the number of people opting for a Debt Relief Order but this doesn't signal an increase in problem debts. Rather it's a result of changes in the rules which have allowed people with bigger debts of up to £20K to use DROs as a means of wiping the slate clean. Indeed, the official figures have confirmed that around a quarter of DROs in Q1 2016 involved qualifying debts greater than the previous threshold of £15,000.
'Taking out a personal loan has hardly ever been so cheap and demand is rising. Figures from the British Bankers Association released earlier this week show that unsecured borrowing by households is growing at around six per cent per year.
'While taking on new debt at current low rates may seem very manageable at the outset, sudden shocks - such as those currently affecting employees in the steel industry or retail sector for example - can result in things getting very difficult very quickly indeed. Over time, we will see whether some borrowers are having too much of a good thing.'