Over the past year personal borrowing has increased by 10 per cent in the form of car loans, credit card balance transfers and personal loans. In contrast, compare that to household incomes having risen just 1.5 per cent over the same period.
It doesn’t appear that we have learnt from our mistakes.
Banks have already been told to set aside £11.4bn in the next 18 months as a safety net in case of future economic shocks.
Lenders appear to have forgotten the impact of the recent economic crisis and have cast aside some of the lessons supposedly learnt as a result.
The public however are still led to believe that the UK financial system is incredibly stronger than it was back in 2008-09.
This fear has been supported by recent news articles about the rise in Personal Contract Purchases (PCPs) – effectively rental. Consumers spent a record £32.5bn on car finance deals in the year to March 2017. There has been plenty of warnings over PCP deals and car finance companies are now in the firing line concerning irresponsible lending.
Car finance companies have said the risk is taken on by the car manufacturer as opposed to the consumer as they guarantee second-hand car values and motorists can hand the car back if they can no longer afford payments – at what cost?
There doesn’t appear to have been any thought as to the effect on household monthly outgoings. It seems that the attractiveness of being able to drive that new luxury car you have always wanted is far more important (despite the fact that there is an ever increasing likelihood that you will never actually own the vehicle).
Couple this with the recent insolvency statistics and it paints a different picture. Personal insolvencies for the three months to March 2017 were nearly 16 per cent higher than a year ago. This has been largely driven by the increase in Individual Voluntary Arrangements.
Corporate insolvencies have also risen by about 5 per cent for the same period than this time last year.
Bailey Ahmad Business Recovery has certainly seen an increase in the number of individuals and corporate entities that are seeking our advice and we have been able to offer bespoke solutions to businesses and individuals alike.
Should you wish to discuss any of our solutions or have a client that could benefit from the right advice please do not hesitate to give Bailey Ahmad Business Recovery a call.