'Wave' of personal insolvencies likely in 2022, Scots restructuring expert warns

Rising debt levels as inflation and interest rates begin to climb are set to lead to a dramatic jump in personal bankruptcies and repossessions, a Scottish restructuring expert has warned.

Blair Milne of Azets in Scotland said interest rates have been low for so long that there is a “generation of consumers inexperienced in managing a sudden rise in their overheads and costs”.

Mr Milne warned that there are clear signs households and individuals are now facing significant increases in the cost of living and debt levels.

The Bank of England’s new chief economist has warned that inflation is likely to reach between 4-5 per cent during 2022 whilst the Office for Budget Responsibility is pointing towards interest rates reaching 3.5 per cent by 2023. Mortgage lenders are already beginning to increase rates, with mortgage costs set to rise 15 per cent by 2023.

Insolvency expert Blair Milne warns that rising interest rates and inflation will see debts levels soar. Picture: Fraser Band.

Capital Economics has predicted that more than 12,000 homes could be repossessed by June next year if the Bank of England follows through with a rise in interest rates.

An estimated 2.2 million borrowers currently have variable rate mortgages whose repayments will change in response to a changing bank rate. In the 1990s, interest rates reached 15 per cent and around 350,000 homes were repossessed.

Mr Milne said any rate increases will mean a significant jump in monthly costs, which will be on top of rising bills for normal household expenditure for items such as energy, fuel, food, clothing and lifestyle expenses.

“Our concern is that a vast number of households are running very tight budgets and have accumulated considerable debt, leaving them with little room for manoeuvre,” he said.

Mr Milne urged anyone concerned about their debt to tackle the problem as soon as possible by reviewing their finances and taking early advice.

“The difference between 2021 and 1991 is that there is far more support in place for anyone facing financial problems and rising levels of debt. It is, however, important to take control of the problem quickly and therefore be in a position to access all the advice and support that is now available.”

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