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Debt relief orders highest since 2009

ended 31. October 2023

Data published this morning showed that the number of debt relief orders (DROs) was the highest quarterly number since their introduction in 2009, just following the Global Financial Crisis.

The data also revealed that:

after seasonal adjustment, the number of individual insolvencies in July to September (Q3) 2023 was 6% lower than in Q2 2023.

bankruptcies also increased, but individual voluntary arrangements (IVAs) were lower. The total number of individual insolvencies was 15% lower than in Q3 2022.

one in 441 adults (at a rate of 22.7 per 10,000 adults) entered insolvency between 1 October 2022 and 30 September 2023. This is a decrease from the 24.7 per 10,000 adults who entered insolvency in the 12 months ending 30 September 2022.

there were 23,089 Breathing Space registrations in Q3 2023. This is 26% higher than in Q3 2022. Of the 23,089 Breathing Space registrations, 22,722 were Standard Breathing Space registrations and 367 were Mental Health Breathing Space registrations.

5 responses from the Newspage community

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Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
The fact that the number of debt relief orders (DROs) is at its highest quarterly number since its introduction in 2009 is a clear sign that households are under severe financial strain. This is likely due to a combination of factors, most specifically the rising cost of living and higher interest rates, which have left many households exposed. The data is a stark reminder of the financial challenges that many households are facing. The government and other stakeholders need to do more to help those who are struggling to make ends meet.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
This data doesn't paint an especially great picture of the financial well-being of the average UK household. Mortgage lenders might take a more cautious approach given these figures, potentially tightening lending criteria or increasing scrutiny of mortgage applications. That being said, the decline in overall insolvencies might make lenders slightly more optimistic about the general financial health of consumers. We live in complicated economic times, and for many households certainly very stressful times.
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Clive Read
Owner at Goldmanread
The rapid pace of base rate increases has taken many borrowers by surprise. Each day we see people struggling with 30%-40% increases in their mortgage payments. This has had a massive impact on their ability to meet other unsecured debts, meaning some are taking drastic measures to "clear the decks" when it comes to outstanding loans and credit cards. However rather than the more dramatic solutions such as Bankruptcy and IVA, we are seeing an increasing number of clients missing payments on credit commitments like loans or credit cards. Additionally, it's becoming more common to see defaults on mobile phone and utility bill payments. This can unfortunately have a very negative effect when looking to arrange a new mortgage. Some mainstream lenders are starting to take a common sense approach to these financial blips but it's important to seek advice if struggling and not bury your head in the sand.
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Amit Patel
Adviser at Trinity Finance
This comes as no real surprise and the writing was on the wall from day 1, as households and businesses have struggled with their finances with the cost of inflation and high interest rates for the past 2 years. The tensions in the Middle East will exacerbate the number of debt relief orders the longer the conflict continues as this could push oil prices higher which will have a ripple effect on the supply chain.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
The increase in debt relief orders is perhaps unsurprising given previous data on increasing consumer debt. DRO's are only applicable to those who have few assets and low income so the picture is somewhat skewed. What is interesting is the number of bankruptcies rising with IVA's falling. In the past many people would have seen an IVA as a viable solution with bankruptcy being less than desirable. It's clear people are struggling.