| Banks ‘write-off’ rising debt levels |
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Levels of personal debt in UK seem to have reached alarming levels with banks now having to write-off bad debt records from last year.
The figures that will be published by the Bank of England on Thursday are expected to illustrate the stunning heights fourth quarter write-offs had touched in 2004, setting a record with levels amounting more than £6bn a year. It was way back in 1993 during the Britain recession that bad debt write offs had stretched to such staggering levels.
This data will also reveal the worrying levels of consumer debt besides highlighting the inclination of most banks to offer big loans to people who couldn’t afford them.
Thereby, consumer bad-debts have to be blamed more than corporate debts for the sharp rise in write-offs since 2001. Above all, indiscriminate credit card lending has triggered write off levels to treble since 1995 and become more than 3% in 2003.
KPMG retail banking head, Simon Walker said that most of the rise in write-offs was on account of banks’ going "more down market" and making credit card lending easily available. It has been observed that increased credit card debt write-offs also augmented write-offs of lending to £2bn now against £100m ten years ago. This, in turn, has caused the household debt write offs (which comprise a large part of credit card debt) to increase to as much as 50 per cent now from a much less 20 per cent in 1993.
However, mortgage debt write-offs were found to be taking the opposite route, with their figures declining. Actually, mortgage debts were less liable to be written off because banks had the option of seizing the property in the event of any default. For that matter, a hike in property prices was also a reason that led to reduced outstanding debt amounts after sale or possession of property.
Posted
on : Mon, 28 Mar 2005 00:00 GMT | Debt News
By : Salim Patel
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