Company and individual insolvencies data Dec 23

For the 1.4m borrowers that are still on ultra-low fixed rate mortgages, the clock is very much in countdown mode. The real problem that I have seen is that, while incredibly low mortgage rates were stress-tested as affordable on the much higher rates we have today, people have taken out further unsecured credit for perhaps a new car or the odd holiday. In an ultra-low interest rate environment, this isn’t that hard to manage for those on a solid income. However, now that rates have increased I am seeing some people really struggle to manage their monthly payments, with several getting into difficulty and missing the odd payment. These are people who historically would never have missed a beat. I’ve seen it due to rate rises but also a lack of company bonuses being paid as businesses also feel the pain.

In isolation, increased mortgage costs are enough to affect most families severely, but when you also include the likes of fuel price hikes, car insurance premiums and food inflation, the overall impact is huge and driving many towards one of the many debt options simply to survive. We have had traditionally low numbers of insolvency whilst interest rates have been so cheap for the past 10-15 years so that any increase will show a high percentage of change. As we move into 2024 and with over 1m extra borrowers about to feel the pain of significantly higher mortgage payments, these insolvency figures will become worse before they improve.

The pressure on UK households and businesses is accelerating as high interest rates, the ongoing cost of living crisis, crippling energy prices and inflation continue to wreak havoc in the economy. If the Bank of England plans to break it to make it, they are certainly getting the first part right. Economic data is slumping, households are not coping and more and more businesses are struggling to stay afloat. With circa. 1.4m UK households coming off ultra-low fixed rate mortgages next year, the consumer data can only get worse. This cannot continue and the Bank of England needs to consider cutting interest rates at the first available opportunity, providing some respite for the millions who of people and businesses who are not managing through this period.

The latest insolvency data shows the continued pressure on businesses and households in every corner of the UK. With inflation still pushing up prices and many seeing their mortgage or rent payments increase, savings, cut-backs and using available credit can only help so much before ultimately the budget breaks. The fact DROs in November 2023 were 45% higher than in November 2022 shows the strain people are under. With over 1.4 million more mortgages coming off low-rate deals in 2024, the situation will get a lot worse before it gets better. It is also a similar picture for businesses with increased costs, reduced demand from embattled consumers, the economy contracting and increased taxation all beating down on them.