Banks and building societies were writing off almost £40m per day in family debts in the second quarter of the year, according to new figures.
A report from the Bank of England found that lenders wrote off as much as £3.5bn of debt between April and June, equivalent to £38.5million per day, the largest amount on record for a single quarter.
Credit card debts accounted for the largest proportion of that figure, with lenders writing-off £2.1bn of debt that they do not expect to see repaid. £1.2bn of the figure was attributed to overdrafts, personal loans and hire purchases whilst just £184m were written-off mortgage debts.
“In a recession, it is inevitable there will be write-offs as a result of people`s financial circumstances changing,” said a spokesman for the British Bankers` Association.
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According to research, `the bank of Mum and Dad` is now calling in its debts – as parents ask for larger amounts of money back from their children, The Telegraph reports.
The findings revealed that one in 10 grown-up children either gave or lent, on average, 8,250 to their parents last year. This figure is 1,750 higher than it was in 2008.
More than one third of parents admitted to using the money they received from their children to repay their own debts, while a similar amount used the money to cover their everyday expenses.
A spokesperson for Debt Advisers Direct commented: “We would advise anyone struggling to afford their day-to-day living costs and/or their debt repayments after the recession to seek professional debt advice. Read more…
The coalition government’s first budget will hit the poor the hardest, according to a report by the Institute for Fiscal Studies (IFS).
The IFS claimed that proposed benefit cuts, such as cuts in tax credits, housing benefits and disability allowance, will hit those on lower incomes the hardest, taking a greater proportion of their total income, with the analysis suggesting that the poorest families will be hit to the tune of £422 between the Budget and April 2014.
This means that only the richest 10% of households lost more in cash terms from the Budget, than those in the bottom 60%.
The report also questioned the government’s decision to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) when calculating certain benefits, given that CPI does not take into account increases in housing costs.
The report said: “Low-income households of working age lose the most as a proportion of income from the tax and benefit reforms announced in the emergency Budget.
“Those who lose the least are households of working age without children in the upper half of the income distribution.
“They do not lose out from cuts in welfare spending, and they are the biggest beneficiaries from the increase in the income tax personal allowance.”
The Treasury said it did not accept the “selective” findings of the IFS.
Consumers took on 2bn more mortgage debt than they repaid in July, according to the latest figures from the British Bankers` Association (BBA).
This represented a 4.1% annual increase in net mortgage lending by banks, the report adds.
Gross mortgage lending came to 8.4bn in July, but this was down on the 8.6bn seen both a month earlier and on average over the six months before that.
Mortgage lending for house purchase came to 5bn, while remortgages came to 3bn and `equity withdrawal and other purposes` accounted for 0.5bn.
Meanwhile, the BBA`s figures also showed a slight increase in net consumer credit lending in July. Read more…
The number of businesses becoming solvent in fell by a third in July year-on-year, raising hopes that the UK can continue its economic recovery.
According to figures from credit reference agency Experian, 1,542 UK businesses failed last month, 33% fewer than the 2,312 insolvencies recorded in July 2009.
This equates to an insolvency rate of 0.08 per cent of the business population in July 2009, compared to 0.12 per cent the year before.
All business segments bar the largest companies, with more than 500 employees, saw insolvency rates fall year-on-year, with the biggest improvements being amongst 101 – 500 employee companies.
This segment saw 30 insolvencies in July 2010, 56 per cent fewer than in July 2009.