LONDON (Reuters) - A surprise rise in interest rates this week will add to a post-Christmas hangover for millions of indebted Britons and help tip many into insolvency, experts warned.
Over 8 million people have unsecured debts of over 10,000 pounds and 2 million are vulnerable to going into personal insolvency, according to industry estimates
A record 30,000 were already predicted to file for insolvency in the first three months of this year as they emerged from Christmas needing to face financial reality.
Thursday's surprise 25 basis point Bank of England interest rate hike to 5.25 percent will increase the strain.
"It couldn't have come at a worse time for a lot of people struggling with debt," said James Falla, managing director of Thomas Charles & Co., a debt management advisor.
"January is the worst time as people start thinking 'I'm really in difficulty, I've overspent, I've had my head in the sand for a few months and now I'm in trouble'. November and December are always slower for us because psychologically people don't want to face up to their problems before Christmas."
Britons are among Europe's most deeply indebted people. Consumer debt averaged 3,500 pounds per person in 2005, more than double the average in France and Germany but below an average of 4,000 pounds in the United States, according to accounting firm PricewaterhouseCoopers
Thomas Charles estimates that one in five British adults have unsecured debts of over 10,000 pounds, with 2.5 million people struggling to meet repayments and 1.1 million on the brink of insolvency.
Accounting services firm Grant Thornton last week predicted that excessive Christmas spending could send 10,000 people into insolvency and the total for the first quarter may hit 30,000, while Falla said the figure could reach 40,000.
There were a record 27,644 insolvencies in England and Wales in the third quarter of last year. The
By Steve Slater
Source: Reuters
