Debt management company MoneyPlus Group warns a “perfect storm of debt issues” could be prompted by any increase in mortgage costs.
MoneyPlus says homeowners are putting off dealing with their debt problems while mortgage costs remain relatively low, meaning that fewer individual voluntary arrangements are being taken out.
AN IVA is an alternative to bancruptcy and constitutes a formal repayment proposal presented to a debtor’s creditors.
The firm says the number of IVAs as a proportion of its news cases fell from 38.5 per cent in 2011 to 32.5 per cent in 2012.
Speaking at the Mortgage Business Expo in London last week, MoneyPlus director of insolvency Stephen Quinn said: “The average disposable income of an IVA client has fallen by 37 per cent since 2008. Household bills have been increasing rapidly, due largely to rising fuel and utility costs, while salaries and tax benefits have stagnated.
“Because mortgage costs have stayed low, many homeowners have been putting off dealing with their debt problems. But an increase in mortgage costs, coupled with rising household bills and static salaries, would create the right conditions for a perfect storm of debt issues.”
Quinn warned homeowners against waiting for rates to rise before confronting any debt problems.